UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________

FORM 10-Q

____________

☒Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September 30, 2017~~

¨March 31, 2021

☐Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 333-207711

__________

HARTMAN vREIT XXI, INC.

(Exact name of registrant as specified in its charter)


Maryland			38-3978914
(State of Organization)			(I.R.S. Employer Identification Number)
2909 Hillcroft ~~Suite 420, Houston, Texas~~			~~77057~~
Suite 420
Houston
Texas			77057
(Address of principal executive offices)			(Zip Code)

______________

(713) 467-2222

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐☒ Smaller reporting company ☒Emerging Growth Company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~November 13, 2017,~~May 1, 2021 there were ~~1,644,615~~8,886,247 shares of the registrant’s common stock issued and outstanding, 22,100 of which were held by an affiliate of the registrant.

HARTMAN vREIT XXI, INC.

Table of Contents




PART I FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21 25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33 36
Item 4.	Controls and Procedures	33 36

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	34 37
Item 1A.	Risk Factors	34 37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34 38
Item 3.	Defaults Upon Senior Securities	35 39
Item 4.	Mine Safety Disclosures	35 39
Item 5.	Other Information	35 40
Item 6.	Exhibits	35 41
	SIGNATURES	36 42

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

September 30, 2017

December 31, 2016
ASSETS
(Unaudited)

Real estate assets, at cost
$                       7,257,174

$                                     -
Accumulated depreciation and amortization
                             (112,685)

                                      -
Real estate assets, net
                          7,144,489

                                      -

Cash and cash equivalents
2,152,430

                              97,810
Investment in unconsolidated joint venture
6,831,800

                         1,376,439
Escrowed investor proceeds
282,050

                            320,775
Lease Commissions, net
20,730

                                      -
Accrued rent and accounts receivable, net
27,904

                                      -
Prepaid expenses and other assets
50,285

                                      -
Due from related parties
440,768

                                      -
Total assets
$                     16,950,456

$                      1,795,024

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Note payable, net
$                       3,474,707

$                                     -
Accounts payable and accrued expenses
329,511

                              57,240
Due to related parties
-

                              19,107
Subscriptions for common stock
282,045

                            320,000
Tenants' security deposits
52,208

-
Total liabilities
4,138,471

          ��                 396,347

Commitments and contingencies

Special Limited Partnership Interests
                                 1,000

                                1,000

Stockholders' equity:

Common stock, Class A, $0.01 par value, 850,000,000 shares authorized, 1,505,454 and 160,775 shares issued and outstanding at September 30, 2017 and December 31, 2016 respectively
15,055

                                1,608
Common stock, Class T, $0.01 par value, 50,000,000 shares authorized, 65,348 shares and 0 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
                                    653

                                      -
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding at June 30, 2017 and March 31, 2017, respectively
-

-
Additional paid-in capital
13,986,596

                         1,452,653
Accumulated distributions and net loss
           (1,191,319)

                            (56,584)
Total stockholders' equity
12,810,985

                         1,397,677

Total liabilities and equity
$                   16,950,456

$                      1,795,024

The accompanying notes are an integral part of these consolidated financial statements.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)

Class A and Class T Common Stock

Shares
Amount
Additional
Paid-In
Capital
Accumulated
Distributions
And Net Loss
Total
Balance at December 31, 2016
160,775
$                1,608
$           1,452,653
$              (56,584)
$             1,397,677
Issuance of common shares
1,410,027
14,100
13,736,298
-
13,750,398
Selling commissions
-
-
(1,202,355)
-
(1,202,355)
Dividends and distributions (stock based)
-
-
-
(252,458)
(252,458)
Dividends and distributions (cash based)
-
-
-
(212,314)
(212,314)
Net loss (including net income attributable to non-controlling interest of $5,400)
-
-
-
(669,963)
(669,963)
Balance at September 30, 2017
1,570,802
$             15,708
$         13,986,596
$         (1,191,319)
$           12,810,985
The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
	March 31, 2021		December 31, 2020
	(Unaudited)
ASSETS
Real estate assets, at cost	$	81,313	$	80,674
Accumulated depreciation and amortization	(12,240)		(10,849)
Real estate assets, net	69,073		69,825
Investment in tenancy in common interest, net	3,632		3,926
Total	72,705		73,751

Cash and cash equivalents	431		408
Restricted cash	170		139
Notes receivable - related party	13,400		13,400
Investment in unconsolidated entities	11,734		11,734
Deferred lease commissions, net	840		760
Accrued rent and accounts receivable, net	2,381		1,849
Prepaid expenses and other assets	131		271
Acquisition deposits	125		125
Total assets	$	101,917	$	102,437

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable, net	$	36,230	$	35,213
Accounts payable and accrued expenses	3,601		4,109
Due to related parties	1,379		420
Subscriptions for common stock	80		130
Tenants' security deposits	595		577
Total liabilities	41,885		40,449

Special limited partnership interests	1		1
Stockholders' equity:
Common stock, Class A, $0.01 par value, 270,000,000 shares authorized, 8,390,166 and 8,342,318 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	83		83
Common stock, Class T, $0.01 par value, 70,000,000 shares authorized, 471,446 shares and 468,982 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	5		5
Common stock, Class S, $0.01 par value, 280,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively.	0		0
Common stock, Class I, $0.01 par value, 280,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively.	0		0
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	0		0
Additional paid-in capital	81,034		80,519
Accumulated distributions and net loss	(21,091)		(18,620)
Total stockholders' equity	60,031		61,987
Total liabilities and total equity	$	101,917	$	102,437
The accompanying notes are an integral part of these consolidated financial statements.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine months ended September 30,

2017

2016
Cash flows from operating activities:

Net loss
$            (669,963)

$                    -
Adjustments to reconcile net loss to net cash used in operating activities:

Stock based compensation
18,750

-
Depreciation and amortization
112,685

-
Deferred loan and leasing commission cost amortization
16,074

-
Equity in earnings of unconsolidated joint venture
(140,199)

-
Loss on re-measurement
2,194

-
Bad debt provision
13,605

-
Changes in operating assets and liabilities:

Accrued rent and accounts receivable
(31,048)

-
Deferred leasing commissions
(21,903)

-
Prepaid expenses and other assets
(45,401)

-
Accounts payable and accrued expenses
140,840

-
Due from related parties
(547,633)

-
Net cash used in operating activities
(1,151,999)

-

Cash flows from investing activities:

Additions to real estate
(27,423)

-
Investment in formerly unconsolidated joint venture
(2,214,480)

-
Investment in unconsolidated joint venture
(6,700,000)

-
Net cash used in investing activities
(8,941,903)

-

Cash flows from financing activities:

Distributions paid in cash
(194,058)

-
Payment of selling commissions
(1,202,355)

-
Escrowed investor proceeds
38,725

(11,000)
Subscriptions for common stock
(37,955)

11,000
Proceeds from issuance of common stock
13,544,165

-
Net cash provided by financing activities
12,148,522

-

Net change in cash and cash equivalents
2,054,620

-
Cash and cash equivalents at the beginning of period
97,810

201,005
Cash and cash equivalents at the end of period
$           2,152,430

$        201,005

Supplemental cash flow information:

Cash paid for interest
$                84,157

$                   -
Supplemental disclosures of non-cash investing and financing activities:

Distributions payable
$                46,225

$                    -
Distributions paid in stock
$              206,233

$                    -

Village Pointe Assets/ Liabilities:

Real estate
$           7,050,000

$                    -
Note payable, net
$        (3,459,805)

$                    -
Net other assets and liabilities
$              171,635

$                    -

The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share data)

	Three Months Ended March 31,
	2021		2020
Revenues
Rental revenues	$	2,964	$	3,037
Tenant reimbursements and other revenues	332		332
Total revenues	3,296		3,369

Expenses (income)
Property operating expenses	1,821		1,334
Asset management fees	138		144
Organization and offering costs	1		16
Real estate taxes and insurance	602		569
Depreciation and amortization	1,391		1,462
General and administrative	271		272
Interest expense	284		242
Interest and dividend income	(440)		(232)
Equity in losses of equity method investment	294		0
Total expenses, net	4,362		3,807

Net loss	$	(1,066)	$	(438)
Basic and diluted loss per common share:
Net loss attributable to common stockholders	$	(0.12)	$	(0.05)
Weighted average number of common shares outstanding, basic and diluted	8,839		8,567

The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, in thousands)

	Class A and Class T Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Distributions And Net Loss		Total
Balance at December 31, 2019	8,512	$	85	$	77,573	$	(11,054)	$	66,604
Issuance of common shares	109	1		1,262		—		1,263
Redemptions of common shares	(2)	—		(26)		—		(26)
Selling commissions	—	—		(90)		—		(90)
Dividends and distributions (DRP)	—	—		—		(590)		(590)
Dividends and distributions (cash)	—	—		—		(774)		(774)
Net loss	—	—		—		(438)		(438)
Balance at March 31, 2020	8,619	$	86	$	78,719	$	(12,856)	$	65,949

	Class A and Class T Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Distributions And Net Loss		Total
Balance at December 31, 2020	8,811	$	88	$	80,519	$	(18,620)	$	61,987
Issuance of common shares	56	—		565		—		565
Redemptions of common shares	(5)	—		(47)		—		(47)
Selling commissions	—	—		(3)		—		(3)
Dividends and distributions (DRP)	—	—		—		(566)		(566)
Dividends and distributions (cash)	—	—		—		(839)		(839)
Net loss	—	—		—		(1,066)		(1,066)
Balance at March 31, 2021	8,862	$	88	$	81,034	$	(21,091)	$	60,031

The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
	Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net loss	$	(1,066)	$	(438)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock based compensation	7		7
Depreciation and amortization	1,391		1,462
Deferred loan and lease commission costs amortization	90		70
Equity in losses of equity method investment	294		0
Bad debt provision	0		22
Changes in operating assets and liabilities:
Accrued rent and accounts receivable	(532)		(100)
Deferred lease commissions	(127)		(324)
Prepaid expenses and other assets	140		(169)
Accounts payable and accrued expenses	(788)		(1,697)
Due to/from related parties	959		(29)
Tenants' security deposits	18		12
Net cash provided by (used in) operating activities	386		(1,184)
Cash flows from investing activities:
Additions to real estate	(639)		(667)
Acquisition deposit	0		(12)
Notes receivable-related parties	0		(3,800)
Net cash used in investing activities	(639)		(4,479)
Cash flows from financing activities:
Proceeds from issuance of common stock	0		818
Payment of redemption of common stock	(47)		(26)
Distributions paid in cash	(566)		(771)
Payment of selling commissions	(3)		(90)
Deferred loan costs paid	(28)		(192)
Change in subscriptions for common stock	(50)		0
Proceeds from revolving credit facility	1,001		6,101
Net cash provided by financing activities	307		5,840

Net (decrease) increase in cash and cash equivalents and restricted cash	54		177
Cash and cash equivalents and restricted cash, beginning of period	547		411
Cash and cash equivalents and restricted cash, end of period	$	601	$	588

Supplemental cash flow information:
Cash paid for interest	$	244	$	198
Supplemental disclosures of non-cash investing and financing activities:
Increase in distributions payable	$	273	$	47
Distributions paid in stock	$	566	$	543

The accompanying notes are an integral part of these consolidated financial statements.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Organization and Business

Hartman vREIT XXI, Inc. (the “Company”) ~~was~~is a Maryland corporation formed on September 3, ~~2015 as a Maryland corporation and intends~~2015. The Company elected to ~~qualify~~be treated as a real estate investment trust (“REIT”)~~. The Company expects to use the proceeds from~~ beginning with its initial public offering to invest in a portfolio of commercial real estate properties that offer a blend of current and potential income based on in place occupancy plus relatively significant potential for growth in income and value from re-tenanting, repositioning or redevelopment. As discussed in Note 9, the Company was initially capitalized by the sale of 22,100 shares of common stock, at an issue price of $9.05 per share, to Hartman Advisors, LLC, an affiliate of the Company’s Sponsor (as defined below) on September 30, 2015.taxable year ended December 31, 2017. The Company’s fiscal year end is December 31.

Effective June 24, 2016, the Company commenced its initial public offering of up to a maximum of $250,000,000 in shares of its common stock to the public in its primary offering at $10.00 per share, with discounts available to certain purchasers, and up to $19,000,000 in shares of its common stock to its stockholders pursuant to its distribution reinvestment plan at $9.50 per share.

On February 6, 2017, the Company amended its registration statement on Form S-11, providing for its public offering of up to $269,000,000 in shares of Class A common stock and Class T common stock, was declared effective by the SEC and the Company commenced offering shares of its Class A and Class T common stock.

In its initial public offering, the Company ~~is offering~~offered to the public up to $250,000,000 in any combination of shares of Class A and Class T common stock and up to $19,000,000 in shares of Class A and Class T common stock to stockholders pursuant to its distribution reinvestment plan.

The Company's follow-on offering (Registration No. 333-232308) was declared effective by the Securities and Exchange Commission on January 14, 2020. In its follow-on offering, the Company registered $180,000,000 in any combination of shares of Class A and Class T common stock ~~is being~~to be offered to the public ~~at an initial price of $10.00 per share~~ and $5,000,000 to ~~stockholders at an initial price of $9.50 per share for Class A common stock purchased~~be offered to shareholders pursuant to the distribution reinvestment plan.

On May 12, 2020, the Company's board of directors authorized the classification and designation of Class I and Class S common stock. As of March 31, 2021, 900,000,000 shares of capital stock were classified as common stock, par value $0.01 per share, 270,000,000 of which were classified and designated as Class A common stock (“Class A Shares”), 280,000,000 were classified and designated as Class S common stock ("Class S Shares"), 280,000,000 of which were classified as Class I common stock ("Class I Shares"), and 70,000,000 were designated as Class T Common stock (“Class T Shares”).

Effective January 26, 2021, the sale price of our Class A, Class S, Class I and Class T common ~~stock is being offered~~shares to the public ~~at an initial~~is $11.38, $10.61, $10.23 and $10.89 per share, respectively, representing the net asset value per share as determined by the board of directors plus the applicable sales commissions and managing broker dealer fees. The sale price of ~~$9.60 per share and~~all classes of common shares to ~~stockholders at an initial price of $9.12 per share for Class T common stock purchased~~our shareholders pursuant to the distribution reinvestment ~~plan.~~

plan is $10.23 per share.

The Company’s board of directors may, in its sole discretion and from time to time, change the price at which the Company offers shares to the public in the primary offering or pursuant to its distribution reinvestment plan to reflect changes in estimated value per share and other factors that the board of directors deems relevant.

Pursuant to the terms of the Company’s initial public offering (the “Offering”), subscription proceeds were held in an escrow account until the Company raised the minimum offering amount of $1,000,000. On December 1, 2016, the Company raised the minimum offering amount and the subscription proceeds held in escrow as of that date were released to the Company.

The Company’s advisor is Hartman XXI Advisors, LLC (the “Advisor”), a Texas limited liability company and wholly owned subsidiary of Hartman Advisors, LLC. Hartman Income REIT Management, Inc., an affiliate of the Advisor, is the Company’s sponsor and property manager (“Sponsor” orand “Property Manager”). Effective July 1, 2020, the Advisor and the Property Manager are wholly owned subsidiaries of Hartman Short Term Income Properties XX, Inc. Subject to certain restrictions and limitations, the Advisor is responsible for managing the Company’s affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company.

Substantially all the Company’s business ~~will be~~is conducted through Hartman vREIT XXI Operating Partnership, L.P., a Texas limited partnership (the “OP”). The Company is the sole general partner of the OP. The initial limited partners of the OP are Hartman vREIT XXI Holdings LLC, a wholly owned subsidiary of the Company (“XXI Holdings”), and Hartman vREIT XXI SLP LLC (“SLP LLC”), a wholly owned subsidiary of Hartman Advisors, LLC. SLP LLC has invested $1,000 in the OP in exchange for a separate class of limited partnership interests (the “Special Limited Partnership Interests”). As the Company accepts subscriptions for shares, it will transfer substantially all the net proceeds of the Offering to the OP as a capital contribution. The partnership agreement provides that the OP will be operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the OP will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the OP being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by the OP in acquiring and operating real properties, the OP will pay all the Company’s administrative costs and expenses and such expenses will be treated as expenses of the OP.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of ~~September 30, 2017, we~~March 31, 2021, the Company had accepted investors' subscriptions for, and issued ~~1,480,854~~8,861,612 shares, net of ~~our~~redemptions, of its Class A ~~common stock, including 10,369 shares issued pursuant to our distribution reinvestment plan,~~ and ~~65,348 shares of our~~ Class T common stock in ~~our~~its initial public offering, including ~~310~~658,029 shares issued as stock distributions and pursuant to ~~our~~its distribution reinvestment plan, resulting in gross ~~offering~~ proceeds of ~~$15,004,383.~~

$87,462,193.

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, ~~2016~~2020 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of ~~September 30, 2017,~~ March 31, 2021, have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The unaudited consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the financial position of the Company as of ~~September 30, 2017,~~March 31, 2021, and the results of its consolidated operations, ~~for the three~~consolidated statements of stockholders' equity, and ~~nine months ended September 30, 2017 and 2016, the consolidated statement of stockholders’ equity for the nine months ended September 30, 2017 and the~~ consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~2020. The results offor the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2017.~~

2021.

The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2020.

The Company’s consolidated financial statements include the Company’s accounts and the accounts of ~~the OP, Hartman Village Pointe, LLC and XXI Holdings, the~~its subsidiaries over which the Company has control. All intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with ~~GAAP~~generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent ~~assets and~~ liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents as of ~~September 30, 2017~~ March 31, 2021and December 31, ~~2016~~2020 consisted of demand deposits at commercial banks.

Restricted Cash

Restricted cash on the accompanying consolidated balance sheets consists of amounts escrowed for future real estate taxes, insurance, capital expenditures and debt service, as required by certain of our mortgage debt agreements.

Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, notes receivable, accrued rent and accounts receivable, accounts payable and accrued expenses, ~~note~~notes payable, net and ~~due from (to)~~balances with related parties. The Company considers the carrying value, other than ~~note~~notes payable, net, to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its ~~note~~notes payable approximates fair value.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Revenue Recognition

The Company’s leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the ~~purpose~~purposes of this calculation. ~~Accrued~~The Company’s accrued rents are included in accrued rent and accounts receivable, ~~net. In accordance with Accounting Standards Codification (“ASC”) 605-10-S99, "Revenue Recognition,”~~net, on the accompanying consolidated balance sheets. The Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. ~~Cost~~Additionally, cost recoveries from tenants are included in ~~tenant reimbursement~~the Tenant Reimbursement and ~~other revenues~~Other Revenues line item in the consolidated statements of operations in the period the related costs are incurred.

The Company’s revenue is primarily derived from leasing activities, which is specifically excluded from ASU 2014-09. The Company’s other revenue is comprised of tenant reimbursements for real estate taxes, insurance, common area maintenance, and operating expenses. Reimbursements from real estate taxes and certain other expenses are also excluded from of ASU 2014-09.

Investment in ~~Unconsolidated~~Real Estate Joint ~~Venture~~

Ventures and Partnerships

To determine the method of accounting for partially owned real estate joint ventures and partnerships, management determines whether an entity is a VIE and, if so, determines which party is the primary beneficiary by analyzing whether we have both the power to direct the entity’s significant economic activities and the obligation to absorb potentially significant losses or receive potentially significant benefits. Significant judgments and assumptions inherent in this analysis include the design of the entity structure, the nature of the entity’s operations, future cash flow projections, the entity’s financing and capital structure, and contractual relationships and terms. We consolidate a VIE when we have determined that we are the primary beneficiary.

Primary risks associated with our involvement with our VIEs include the potential funding of the entities’ debt obligations or making additional contributions to fund the entities’ operations or capital activities.

Partially owned, non-variable interest real estate joint ventures and partnerships over which we have a controlling financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out rights and substantive participating rights. Partially owned real estate joint ventures and partnerships where we do not have a controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity method.

Management continually analyzes and assesses reconsideration events, including changes in the factors mentioned above, to determine if the consolidation or equity method treatment remains appropriate.

The ~~Company’s~~Company's investments in Hartman SPE, LLC and Hartman XX are accounted for in accordance with accounting standards for equity securities. Management has determined that the Hartman SPE, LLC and Hartman XX investments do not have readily determinable fair values and are recorded at cost minus impairment. The Company's investment in ~~unconsolidated joint venture in Hartman Village Pointe was accounted for under the equity method at December 31, 2016. Effective February 8, 2017, the Company owns all of Hartman Village Pointe.~~

On April 11, 2017, the Company entered into a membership interest purchase agreement with Hartman XX Operating Partnership (“XX OP”), the operating partnership of Hartman Short Term Income Properties XX, Inc., a related party, pursuant to which the Company may acquire up to $10,000,000 of XX OP’s equity ownership in Hartman Three Forest Plaza LLC. As of September 30, 2017, the Company has acquired an approximate 37.6% equity interest in Hartman Three Forest Plaza LLC for $6,700,000. On October 19, 2017, the Company acquired an additional 11.2% equity interest for $2,000,000 bringing its total equity interest to approximately 48.8%.

~~The Company’s investment in Hartman Three Forest Plaza LLC~~3100 Weslayan is accounted for ~~under~~as an equity method investment.

The Company evaluates its investment in real estate joint ventures and partnerships for impairment each reporting period. The Company evaluates various factors, including operating results of the ~~equity method.~~

~~Real Estate~~

investee, ability and intent to hold the investment and views on current market and economic conditions, when determining if there is a decline in the investment value. The Company will record an impairment charge if it's determined that a decline in the estimated fair value of an investment below its carrying amount is other than temporary. The ultimate realization is dependent on a number of factors, including the performance of each investment and market conditions. There is no certainty that impairments will not occur in the future if market conditions decline or if management’s plans for these investments change.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Allocation of Purchase Price of Acquired Assets

Acquisitions of integrated assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. The Company believes most of its future acquisitions of operating properties will qualify as asset acquisitions.Third party transaction costs, including acquisition fees paid to Advisor, associated with asset acquisitions will be capitalized while internal acquisition costs will continue to be expensed as incurred.

Upon acquisition, the purchase price of properties is allocated to the tangible assets acquired, consisting of land, buildings and improvements, any assumed debt and asset retirement obligations, if any, based on their relative fair values. Acquisition costs, including acquisition fees paid to our advisor, are capitalized as part of the purchase price. Initial valuations are subject to change during the measurement period, but the measurement period ends as soon as the information is available. The measurement period shall not exceed one year from the acquisition date.

Land and building and improvement fair values are derived based upon the Company’s estimate of fair value after giving effect to estimated replacement cost less depreciation or estimates of the relative fair value of these assets using discounted cash flow ~~analyses~~analysis or similar methods. ~~Any~~

The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases.

The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and management’s consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the ~~property acquired~~contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the ~~purchase price~~remaining term of the ~~property is recorded as goodwill or gain (loss) on acquisition of the property.~~

respective leases.

The Company determines the fair value of any assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that the Company believes it could obtain at the date of acquisition. Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan as interest expense.

In allocating the purchase price of each of the Company’s acquired or purchased properties, the Company makes assumptions and uses various estimates, including, but not limited to, the estimated useful lives of the assets, the cost of replacing certain assets and discount rates used to determine present values. The Company uses Level 3 inputs to estimate fair value of the acquired properties. Many of these estimates are obtained from independent ~~third party~~third-party appraisals. However, the Company is responsible for the source and use of these estimates. These estimates require judgment and are subject to being imprecise; accordingly, if different estimates and assumptions were derived, the valuation of the various categories of the Company’s properties or related intangibles could in turn result in a difference in the depreciation or amortization expense recorded in the Company’s consolidated financial statements. These variances could be material to the Company’s results of operations and financial condition.

The Company has early adopted Accounting Standards Update, or ASU, No. 2017-01, “Clarifying the Definition of a Business.” In accordance with the guidance provided by this accounting pronouncement, provided that the acquisition of real estate is determined to be the acquisition of an asset versus the acquisition of a business, the allocation of purchase price will not include an allocation to intangible assets, in particular in-place lease value. Further, the Company will capitalize acquisition fees and expenses associated with real estate asset acquisitions versus recording such fees as an expense in the period incurred in connection with the acquisition of a business. The effect of adoption in the accompanying consolidated financial statements, is that the acquisition fee payable to advisor in the amount of $33,750 for the year ended December 31, 2016 and $142,500 for the nine months ended September 30, 2017, which would have been expensed if the acquisition of the Company’s joint venture investment and subsequent purchase of the equity interest of the former joint venture partner were considered an acquisition of a business, have been capitalized and added to the unconsolidated joint venture investment and real estate assets at cost as of December 31, 2016 and September 30, 2017, respectively.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Depreciation and amortization

Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for buildings and improvements. Tenant improvements are depreciated using the straight-line method over the lesser of the life of the improvement or the remaining term of the lease.

In-place leases are amortized using the straight-line method over the weighted average years’ remaining calculated on terms of all of the leases in-place when acquired.

Impairment

The Company reviews its real estate and other assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there ~~has been no~~is 0 impairment indicated in the carrying value of the Company’s real estate assets as of ~~September 30, 2017.~~

March 31, 2021.

Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to ~~release~~re-lease the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the property’s future cash flow and fair value and could result in the overstatement of the carrying value of ~~our~~the Company’s real estate and related intangible assets and net income.

Fair Value Measurement

Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:


Level 1:			Observable inputs such as quoted prices in active markets.
Level 2:			Directly or indirectly observable inputs, other than quoted prices in active markets.
Level 3:			Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions.
Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:

Market Approach:			Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Cost Approach:			Amount required to replace the service capacity of an asset (replacement cost).
Income Approach:			Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models).

The Company’s estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Accrued Rent and Accounts Receivable

~~Included in accrued~~

Accrued rent and accounts receivable ~~are~~include base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends.

Prepaid expenses and other assets

Prepaid expenses and other assets include prepaid insurance, subscription receivable and miscellaneous other assets and prepayments. As of March 31, 2021 and December 31, 2020, the Company had $131,000 and $271,000, respectively in prepaid expenses and other assets.

Acquisition Deposits

Acquisition deposits represent funds placed in escrow or advanced to a seller of property which the Company plans to acquire. As of March 31, 2021 and December 31, 2020, the Company had acquisition deposits of $125,000 which are included in the consolidated balance sheets.

Organization and Offering Costs

Prior to achieving the minimum offering amount of $1,000,000, organization and offering costs of the Company were incurred by Advisor on behalf of the Company. Such costs include legal, accounting, printing and other offering expenses, including marketing, salaries and direct expenses of the Advisor’s employees and employees of the Advisor’s affiliates and others. Under the terms of the advisory agreement between the Company and the Advisor, upon the satisfaction of the minimum offering amount and the release to the Company of all subscription proceeds held in escrow, the Company would be obligated to reimburse the Advisor for organization and offering costs incurred by Advisor in connection with the Offering. Effective December 31, 2016, the advisory agreement between the Company and the Advisor was amended to provide that the liability of the Company to the Advisor for reimbursement of offering and organization costs of the Company incurred by the Advisor prior to completion of the minimum offering, shall not be reimbursable to the Advisor until the Company’s receipt of gross offering proceeds in its initial public offering is at least $10,000,000.

As of ~~September 30, 2017, the Company has received $15,004,383 in gross offering proceeds.~~

~~As of September 30, 2017,~~March 31, 2021, total organization and offering costs incurred for the ~~offering~~Offering amounted to ~~$928,357 of which the Advisor has incurred organization and offering costs of $877,443 on behalf of the Company.~~$1,774,000. The ~~Advisor has been reimbursed $824,514 for organization and offering costs which is limited to the~~ total organizational and offering costs incurred by the Company (including selling commissions, dealer manager fees and all other underwriting compensation) will not ~~exceeding~~exceed 15% of the aggregate gross proceeds from the sale of the shares of common stock sold in the Offering.

Organization costs, when recorded by the Company, are expensed as incurred, and offering costs, which include selling commissions, dealer manager fees and all other underwriting compensation, are deferred and charged to stockholders’ equity as such amounts are reimbursed or paid by the Advisor, the dealer manager or their affiliates from gross offering proceeds.

For ~~the three and nine months ended September 30, 2017 and 2016, such costs totaled $23,462 and $0 and $872,440 and $0, respectively.~~

~~Advertising~~

The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations. Advertising costs totaled $793 and $0 for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively. Advertising~~2020, such costs totaled ~~$5,527~~$1,000 and ~~$0 for the nine months ended September 30, 2017 and 2016,~~$16,000, respectively.

Income Taxes

The Company ~~intends to make an election~~elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing in the taxable year ~~ending~~ended December 31, 2017. If the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, so long as it distributes at least 90 percent of its REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with ~~GAAP.)~~GAAP). REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. Prior to qualifying to be taxed as a REIT, the Company is subject to normal federal and state corporation income taxes.

The Company accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company records a valuation allowance for net deferred tax assets that are not expected to be realized.

For the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the Company had net ~~income of $98,927 and $0, respectively. For the nine months ended September 30, 2017 and 2016, the Company incurred a net~~ loss of ~~$669,963~~$1,066,000 and ~~$0,~~$438,000, respectively. The Company ~~does not anticipate forming any~~formed a taxable REIT ~~subsidiaries or otherwise generating~~subsidiary which may generate future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation ~~allowance in that no future taxable income is expected.~~allowance. Accordingly, no0 deferred tax benefit or deferred tax asset has been recorded in the consolidated financial statements.

~~Only~~

The Company is required to recognize in its consolidated financial statements the financial effects of a tax position only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Management has reviewed the Company’s tax positions and is of the opinion that material positions taken

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

by the Company would more likely than not be sustained upon examination. Accordingly, the Company has not recognized a liability related to uncertain tax positions as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, respectively.

~~Earnings~~

Loss Per Share

The computations of ~~basic and diluted earnings~~loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities. The Company’s potentially dilutive securities include special limited partnership interests – see Note ~~11.~~12. For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, there were no0 shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016 because no shares are issuable.~~

2020.

Concentration of Risk

The Company maintains cash accounts in ~~one~~1 U.S. financial institution. The terms of ~~these~~the Company’s deposits are on demand to minimize risk. The balances of ~~these~~the Company’s depository accounts may exceed the federally insured ~~limits. No~~limit. NaN losses have been incurred in connection with these deposits.

The geographic concentration of the Company’s real estate assets makes it susceptible to adverse economic developments in the State of Texas. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Major tenants are defined as those tenants which individually comprise more than 10% of the Company’s total rental revenues. ~~The following four individual tenants~~One tenant of the ~~Village Pointe property each represent more than 10% of total rental revenues~~Spectrum Building represents 18% and 19% for the ~~nine~~three months ended ~~September 30, 2017:~~

March 31, 2021 and 2020, respectively.

Tenant Name
Annualized Rental Revenue
Percentage of Total Annualized Rental Revenue
Initial Lease Date
Lease Expiration Year
Mattress Firm
$ 119,915
17.3%
10/2013
2018
SA Bike World
109,918
15.9%
11/2016
2026
Top Brass, Inc.
96,034
13.9%
11/2015
2021
ABDEP, LP
81,072
11.7%
1/2015
2020
Total
$ 406,939
58.8%

~~Recent~~Going Concern Evaluation

Pursuant to ASU 2014-15, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. The Company's has a $20 million revolving credit loan with a maturity date of December 27, 2021. In order to renew or extend the revolving credit loan, the Company must meet the lenders underwriting criteria at the time of such renewal or extension request. The Company has a $2,520,000 term loan with an extended maturity date of March 14, 2022. In order to further extend the term loan maturity date, the Company must meet the second extension criteria set forth in the term loan agreement.

Management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these consolidated financial statements due to the fact of the uncertainty regarding the loan maturities. Management believes that the Company will be able to extend the maturity date or renew the loans for one year or longer which will mitigate the maturity dates issue within one year of the issuance date of these consolidated financial statements.

Recently Adopted Accounting Pronouncements

~~In May 2014,~~

On January 1, 2019, the ~~Financial~~Company adopted Accounting Standards ~~Board,~~Update ("ASU") 2016-02, "Leases," which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or ~~FASB, issued ASU No. 2014-09, “Revenue from Contracts~~operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of use asset and a lease liability for all leases with ~~Customers,” which~~a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for in the same manner as operating leases today.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The new standard requires lessors to account for leases using an ~~entity~~approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. In connection with the new revenue guidance (ASC 606), the new revenue standard will apply to other components of revenue deemed to be non-lease components. Under the new guidance, we will continue to recognize the ~~amount~~lease components of lease revenue ~~to which it expects to be entitled for~~on a straight-line basis over our respective lease terms as we do under prior guidance. However, we would recognize the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to defer the effective date to January 1, 2018 with early adoption beginning January 1, 2017. We have begun to evaluate each of our revenue streamsnon-lease components under the new ~~model. Based on preliminary assessments, we do~~revenue guidance as the related services are delivered. As a result, the total revenue recognized over time would not ~~expect~~differ under the new guidance. This does not result in a difference from how the Company has historically recognized revenue for these lease and non-lease components.

Additionally, ASU 2016-02 requires that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under ASU 2016-02, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. This does not result in a difference from how the Company has historically recognized lease acquisition costs. The adoption of ASU ~~No. 2014-09 to have a~~2016-02 had no material ~~effect~~impact on ~~our~~the consolidated financial ~~position or our~~statements.

On January 1, 2019, the Company adopted ASU 2018-07, "Improvements to Non-employee Stock-Based Payment Accounting." The updated guidance simplifies aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. The adoption of this guidance had no material impact on the consolidated ~~results of operations.~~

financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In ~~January~~June 2016, the FASB issued ASU No. ~~2016-01, “Recognition and~~2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial ~~Assets~~Instruments. The updated guidance requires measurement and ~~Liabilities,” which enhances~~recognition of expected credit losses for financial assets, including trade and other receivables, held at the reporting ~~requirements surrounding~~date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the ~~measurement~~current guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial ~~instruments and~~assets. Generally, the pronouncement requires ~~equity securities to be measured at fair value with changes in the fair value recognized through net income for the period. ASU No. 2016-01~~a modified retrospective method of adoption. This guidance is effective for ~~our~~ fiscal ~~year commencing~~years and interim periods within those years beginning after January 2023, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on ~~January 1, 2018. Based on preliminary assessments, we do not expect~~ the ~~adoption of ASU No. 2016-01 to have a material effect on our~~ consolidated financial ~~position or our consolidated results of operations.~~

statements when adopted.

In ~~February 2016, the FASB~~March 2020, issued ASU No. ~~2016-02, “Leases,” which changes lessee~~2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to ~~reflect the financial liability~~contracts, hedging relationships, and ~~right-of-use asset that~~other transactions affected by reference rate reform if certain criteria are ~~inherent to leasing an asset on the balance sheet. ASU No. 2016-02~~met. The standard is effective for ~~our fiscal year commencing~~all entities as of March 12, 2020 through December 31, 2022. An entity can elect to apply the amendments as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to that date that the financial statements are available to be issued. The Company is currently evaluating the impact this guidance will have on ~~January 1, 2019, but early adoption is permitted. Based on preliminary assessments, we do not expect~~ the ~~adoption of ASU No. 2016-02 to have a material effect on our~~ consolidated financial ~~position or our consolidated results of operations.~~

~~In October 2016, the FASB issued ASU No. 2016-17, “Interest Held Through Related Parties That Are Under Common Control,” which amends the accounting guidance~~statements when determining the treatment of certain VIE’s to include the interest of related parties under common control in a VIE when considering whether or not the reporting entity is the primary beneficiary of the VIE when considering consolidation. We have adopted this guidance for all periods presented.

In November 2016, the FASB issued ASU No. 2016-18, “Classification of Restricted Cash,” which addresses the Statement of Cash Flow classification and presentation of restricted cash transactions. ASU No. 2016-18 is effective for our fiscal year commencing on January 1, 2018. The effect of this amendment is to be applied retrospectively and early adoption is permitted. We expect to adopt ASU No. 2016-18 for our fiscal year commencing on January 1, 2018. Based on preliminary assessments, we do not expect the adoption of ASU No. 2016-18 to have a material effect on our consolidated financial position or our consolidated results of operations.

adopted.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 – Real Estate

The Company’s real estate assets ~~as of September 30, 2017 and December 31, 2016~~ consisted of the ~~following:~~

following, in thousands:


	~~September 30, 2017~~	~~December 31, 2016~~
~~Land~~	~~$ 1,762,500~~	~~$ -~~
~~Buildings and improvements~~	~~5,494,674~~	-
	~~7,257,174~~	-
~~Less accumulated depreciation and amortization~~	~~(112,685)~~	-
~~Total real estate assets~~	~~$ 7,144,489~~	~~$ -~~


	March 31, 2021		December 31, 2020
Land	$	16,816	$	16,816
Buildings and improvements	57,020		56,381
In-place lease value intangible	7,477		7,477
	81,313		80,674
Less accumulated depreciation and amortization	(12,240)		(10,849)
Total real estate assets	$	69,073	$	69,825

Depreciation expense for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 was ~~$46,271~~$902,000 and ~~$0,~~$839,000, respectively. ~~Depreciation expense~~Amortization expenses for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 was ~~$112,685~~$489,000 and ~~$0, respectively.~~

$623,000, respectively,

The Company identifies and records the value of acquired lease intangibles at the property acquisition date. Such intangibles include the value of acquired in-place leases and above and below-market leases. Acquired lease intangibles are amortized over the leases' remaining terms. With respect to all properties owned by the Company, the Company considers all of the in-place leases to be market rate leases.

The amount of total in-place lease intangible asset and the respective accumulated amortization are as follows, in thousands:


	March 31, 2021		December 31, 2020
In-place lease value intangible	$	7,477	$	7,477
In-place leases – accumulated amortization	(5,440)		(4,951)
Acquired in-place lease intangible assets, net	$	2,037	$	2,526

Acquisition fees incurred were ~~$142,500 and~~ $0 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. The acquisition ~~fee has~~fees have been capitalized and added to the real estate assets, at cost, in the accompanying consolidated balance sheets. Asset management fees incurred were ~~$13,219~~$138,000 and $0$144,000 for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively and $37,013 and $0 for the nine months ended September 30, 2017 and 2016,~~2020, respectively. Asset management fees are captioned as such in the accompanying consolidated statements of operations.

On ~~November 14, 2016,~~December 29, 2020, the Company ~~contributed $100,000~~completed its acquisition of tenant-in-common interests representing an ownership of approximately 83% of an office building located at 3100 Weslayan, Houston, Texas. The property comprises approximately 78,289 rentable square feet and is commonly referred to ~~Hartman Village Pointe, LLC (“Hartman Village Pointe”) in exchange~~as Weslayan. The remaining 17% TIC ownership is owned by Allen Hartman. The tenant-in-common interests were acquired from unrelated third parties, for ~~an initial 2.65% membership interest in Hartman Village Pointe, a joint venture between~~cash consideration of $3,758,000, and reflects the Company's share of the underlying net assets and liabilities of Weslayan. In connection with the Weslayan TIC purchase, the Company became party to a loan agreement where it is jointly and ~~Hartman XX Operating Partnership (“Hartman XX LP”),~~severally liable with the ~~operating partnership of Hartman XX. Pursuant to~~other TIC owner, Allen Hartman. The Weslayan property is collateral for the terms of a membership purchase agreement between the Company and Hartman XX LP, the Company may from time to time acquire up to all of Hartman XX LP’s remaining membership interest in Hartman Village Pointe at a price equal to Hartman XX LP’s investment cost.

loan. As of ~~December~~March 31, ~~2016,~~2021, the ~~Company’s total equity investment in Hartman Village Pointe was $1,350,000, representing~~loan had an ~~approximate 35.8% membership interest.~~

Asoutstanding principal balance of ~~January 19, 2017,~~$3,977,000 and a current interest rate of 4.66%. The maturity date of the ~~Company owned more than 50%~~loan is August 6, 2024. Installments of ~~Hartman Village Pointe~~principal and ~~as of that date, and from that point forward Hartman Village Pointe is included in these consolidated financial statements.~~

~~As of February 8, 2017, the Company owned 100% of Hartman Village Pointe.~~

interest are payable monthly. The Company ~~re-measured its interest, with a carrying value~~incurred $168,000 of ~~$3,764,024 as of February 8, 2017. The~~ acquisition ~~date fair value of~~fees from our Advisor from the ~~previous equity interest in the joint venture was $3,761,830.~~purchase. The Company ~~recognized a loss of $2,194~~exercises significant influence as a result of ~~revaluing its prior~~the Weslayan TIC ownership interest, but the company does not have financial and operating control. Weslayan is accounted for as an equity ~~interest held before the acquisition. The loss is reflected as “loss~~method investment and presented on ~~re-measurement” in~~ the consolidated ~~statements~~balance sheet within the "Investment in tenant in common interest, net" line item. The Company recognized equity in losses of ~~operations.~~

~~The following table summarizes~~equity method investment of $294,000 and $0 for the ~~fair value of~~three months ended March 31, 2021 and 2020, respectively, related to the ~~assets acquired and the liabilities assumed based upon the Company’s purchase price allocations of the Company’s 2017 property acquisition as of the respective acquisition date:~~

Weslayan TIC interest.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


~~Assets acquired:~~
~~Real estate assets~~	~~$ 7,050,000~~
~~Accounts receivable and other assets~~	~~273,352~~
~~Total assets~~	~~7,323,352~~
~~Liabilities assumed:~~
~~Note payable~~	~~(3,459,805)~~
~~Accounts payable and accrued expenses~~	~~(49,509)~~
~~Security deposits~~	~~(52,208)~~
~~Total liabilities assumed~~	~~(3,561,522)~~
~~Fair value of net assets acquired~~	~~$ 3,761,830~~

Note 4 — Investment in unconsolidated ~~joint venture~~

~~On April 11, 2017,~~entities

Effective March 1, 2019, the ~~Company entered into a membership~~Company's board of directors approved the exchange of 3.42% of the Company's 5.89% ownership interest ~~purchase agreement with~~in Hartman ~~XX Limited Partnership (“Hartman XX LP”), the operating partnership~~SPE, LLC for 700,302 shares of common stock of Hartman Short Term Income Properties XX, Inc.~~, an affiliate~~ ("Hartman XX"). The exchange reduced the Company’s ownership interest in Hartman SPE, LLC from 5.89% to 2.47%.

On April 14, 2020, the Company made a tender offer to shareholders of Hartman Income REIT, Inc. ("HIREIT") to acquire up to 500,000 shares of HIREIT common stock at a price of $4.00 per share. On May 1, 2020, the Company extended the term of the ~~Company. Pursuant~~tender offer until May 13, 2020 and modified the offer to ~~the terms~~purchase up 500,000 shares of HIREIT common stock at a ~~membership interest purchase agreement between~~price of $5.00 per share.

As of September 24, 2020, the Company completed the acquisition of 661,940 HIREIT common shares and 80,000 Hartman Income REIT Operating Partnership ("HIROP") OP units for consideration of $3,709,703.

The HIREIT common shares and HIROP OP units contemporaneously converted to 497,926 Hartman XX common shares and 60,178 Hartman XX Operating Partnership OP units.

The Company's investment in Hartman SPE, LLC and Hartman XX ~~LP,~~do not have a readily determinable fair value and are recorded at cost minus impairment. The aggregate carrying amount for the investments is $11,734,000. The Company ~~may acquire up to $10,000,000 of the equity membership interest of~~did 0t receive any distributions from Hartman ~~XX LP in Hartman Three Forest Plaza,~~SPE, LLC ~~(“Three Forest Plaza LLC”).~~

~~As of September 30, 2017, the Company has acquired an approximately 37.6% equity interest in Three Forest Plaza LLC for $6,700,000.~~ ~~On October 19, 2017, the Company acquired an additional 11.2% equity interest for $2,000,000 bringing its total equity interest to approximately 48.8%.~~

~~Equity in earnings of the unconsolidated joint venture were $88,378 and $0~~ for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and $140,199 and $0 for~~2020. For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively. Equity in earnings~~2020, the Company recognized dividend income of ~~unconsolidated joint venture is captioned as such in the accompanying consolidated statements of operations.~~

$110,000 and $123,000, respectively from Hartman Short Term Income Properties XX, Inc.

Note 5 — Accrued Rent and Accounts Receivable, net

Accrued rent and accounts receivable, net, consisted of the ~~following:~~

following, in thousands:


	~~September 30, 2017~~	~~December 31, 2016~~
~~Tenant receivables~~	~~$ 13,912~~	~~$ -~~
~~Accrued rent~~	~~27,597~~	-
~~Allowance for uncollectible accounts~~	~~(13,605)~~	-
~~Accrued rents and accounts receivable, net~~	~~$ 27,904~~	~~$ -~~


	March 31, 2021		December 31, 2020
Tenant receivables	$	1,630	$	1,167
Accrued rent	898		829
Allowance for uncollectible accounts	(147)		(147)
Accrued rents and accounts receivable, net	$	2,381	$	1,849

As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, the Company had an allowance for uncollectible accounts of ~~$13,605 and $0, respectively,~~$147,000, related to tenant receivables that the Company has specifically identified as potentially uncollectible based on assessment of each tenant’s credit-worthiness. For the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the Company recorded bad debt expense in the amount of ~~$8,503~~$0 and ~~$0, respectively, and $13,605 and $0 for the nine months ended September 30, 2017 and 2016,~~$22,000, respectively. Bad debt expense and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.

Note 6 — Future Minimum Rents

The Company leases the majority of its properties under noncancellable operating leases which provide for minimum base rentals. A summary of future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancellable operating leases in existence at March 31, 2021 is as follows, in thousands:

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


March 31,	Minimum Future Rents
2021	$	10,069
2022	7,149
2023	5,841
2024	3,359
2025	1,851
Thereafter	723
Total	$	28,992

Note 67 — ~~Note~~Notes Payable, net

The ~~Company’s wholly owned subsidiary, Hartman Village Pointe, LLC, is a party to a $3,525,000, three-year mortgage loan agreement with a bank. The mortgage loan is secured by~~following table summarizes the ~~Village Pointe property. Unamortized deferred loan costs at the time of the acquisition, on February 8, 2017, of Hartman Village Pointe, LLC were $65,195. The interest rate is one-month~~Company's outstanding notes payable, net in thousands:


Property/Facility	Current Maturity	Rate (1)	March 31, 2021		December 31, 2020
Richardson Tech Center (2)	March 2022	L+275bps	$	2,520	$	2,520
Master Credit Facility Agreement - EWB (3)	December 2021	P - 50bps	20,000		20,000
Master Credit Facility Agreement - EWB (4)	March 2023	P - 50bps	13,925		12,925
			36,445		35,445
Less unamortized loan costs			(215)		(232)
			$	36,230	$	35,213

(1) One-month LIBOR plus 2.75%. The loan is payable in monthly installments of interest only until the initial maturity date which is December 14, 2019. Thereafter, if the loan is extended pursuant to the terms of the loan agreement, the loan will be payable("L"); Prime ("P")

(2) Payable in monthly installments of principal and ~~interest.~~interest until the maturity date. The interest rate as ~~at September 30, 2017~~of March 31, 2021 was ~~3.9878%~~3.25%.

(3) The Company is a party to a $20 million master credit facility agreement ("MCFA") with East West Bank. The borrowing base of the MCFA may be adjusted from time to time subject to the lender’s underwriting with respect to real property collateral which secure the amount available to be borrowed. As of March 31, 2021 the MCFA is secured by the Spectrum Building and the 11211 Katy Freeway Building, the 1400 Broadfield Building, the 16420 Park Ten Building and the 7915 FM 1960 Building. The interest rate as of March 31, 2021 was 2.75%. The outstanding balance under the MCFA was $20,000,000 as of March 31, 2021 and the amount available to be borrowed was $0.

(4) On March 10, 2020, the Company entered into a second $20 million master credit facility agreement ("MCFA II") with East West Bank. The Village Pointe and Accesso Portfolio properties are collateral security for the credit facility. The initial loan availability under the credit agreement is $13,925,000. The company entered into a joinder and amendment to the MCFA II facility dated March 29, 2021 which added an office property located in Houston, Texas and owned by Hartman Income REIT Property Holdings, LLC, an affiliate of the Company and Hartman XX, to the collateral security for the credit facility. The Company is a guarantor under the MCFA II credit facility. The borrowing base of the credit facility increased from $13,925,000 to $15,550,000. The credit agreement matures on March 9, 2023. The interest rate as of March 31, 2021 was 2.75%.

On March 29, 2021, the MCFA II credit facility was modified to add a collateral property owned by Hartman Income REIT Property Holdings, LLC ("HIRPH"), a wholly owned subsidiary of Hartman XX Operating Partnership, LP. HIRPH was added to the MCFA II credit facility by means of a joinder agreement. The borrowing base of the credit facility increased $1,625,000 as a result of the credit facility modification.. The outstanding balance under the MCFA II was $13,925,000 as of March 31, 2021 and the amount available to be borrowed was $1,625,000.

In connection with the Weslayan TIC purchase, the Company became party to a a loan agreement where it is jointly and severally liable with the other TIC owner, Allen Hartman. The 3100 Weslayan property is collateral for the loan. The loan had an outstanding balance of $3,977,000 as of March 31, 2021 and interest rate of 4.66%.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Interest expense for ~~the~~ three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 was ~~$39,625~~$284,000 and ~~$0,~~$242,000, respectively, including ~~$5,588~~$43,000 and ~~$0 of deferred loan cost amortization. Interest expense for the nine months ended September 30, 2017 and 2016 was $106,464 and $0, respectively, including $14,901 and $0~~$43,000 of deferred loan cost amortization. Unamortized deferred loan costs were ~~$50,294~~$215,000 and $0$232,000 as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, respectively. Interest expense of ~~$6,233~~$88,000 and $0$84,000 was payable as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Note 78 — Related Party Arrangements

The Advisor is a wholly owned subsidiary of Hartman Advisors, ~~LLC, a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager.~~LLC. The Property Manager is ~~a wholly owned subsidiary of~~ Hartman Income REIT Management, ~~LLC,~~Inc., which iswas a wholly owned by Hartman Income REIT, Inc. Effective July 1, 2020 Hartman Advisors, LLC and ~~Subsidiaries, of which approximately 16% of the voting stock is~~Hartman Income REIT Management, Inc. are wholly owned by ~~Allen R.~~ Hartman ~~who is the Chief Executive Officer and Chairman of the Board of Directors.~~

Short Term Income Properties XX, Inc.

The Advisor and certain affiliates of the Advisor ~~will~~ receive fees and compensation in connection with the ~~Offering,~~offering, and the acquisition, management and sale of the Company’s real estate investments. In addition, in exchange for $1,000, the OP has issued the Advisor a separate, special limited partnership interest, in the form of Special Limited Partnership Interests. See Note 1112 (“Special Limited Partnership Interest”) below.

The Advisor ~~will receive~~receives reimbursement for organizational and offering expenses incurred on the Company’s behalf, but only to the extent that such reimbursements do not exceed actual expenses incurred by the Advisor and would not cause the cumulative selling commission, the dealer manager fee and other organization and offering expenses borne by the Company to exceed 15.0% of gross offering proceeds from the sale of shares in the ~~Offering.~~

offering.

The Advisor, or its affiliates, ~~will receive~~receives an acquisition fee equal to 2.5% of the cost of each investment the Company acquires, which includes the amount actually paid or allocated to fund the purchase, development, construction or improvement of each investment, including acquisition expenses and any debt attributable to each investment. Acquisition fees of ~~$176,250~~$0 were earned by the Advisor ~~as a result of~~for the ~~interests acquired in Hartman Village Pointe.~~

three months ended March 31, 2021 and 2020, respectively.

The Advisor, or its affiliates, will receive a debt financing fee equal to 1.0% of the amount available under any loan or line of credit originated or assumed, directly or indirectly, in connection with the acquisition, development, construction, improvement of properties or other permitted investments, which will be in addition to the acquisition fee paid to the Advisor. NoNaN debt financing fees were earned by Advisor for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~

2020.

The Company pays ~~Hartman Income REIT Management, Inc. (“HIRM”),~~the Property Manager, an affiliate of the Advisor, property management fees equal to ~~(i) 5%~~3% of the effective gross revenues of the managed properties for the management of retail centers, warehouse, industrial and flex properties and (ii) 3% or 4% of the effective gross revenues for office buildings, as applicable based upon the square footage and gross property revenues of the office buildings.property. The Company pays ~~HIRM~~and expects to pay the Property Manager leasing fees in an amount equal to the leasing fees charged by unaffiliated persons rendering comparable services in the same geographic location of the applicable property, provided that such fees will only be paid if a majority of the Company’s board of directors, including a majority of its independent directors, determines that such fees are fair and reasonable in relation to the services being performed. ~~HIRM~~The Property Manager may subcontract the performance of its property management and leasing duties to third parties and ~~HIRM~~the Property Manager will pay a portion of its property management fee to the third parties with whom it subcontracts for these services. The Company ~~reimburses~~will reimburse the costs and expenses incurred by ~~HIRM~~the Property Manager on the Company’s behalf, including the wages and salaries and other employee-related expenses of all employees of ~~HIRM~~the Property Manager or its subcontractors who are engaged in the operation, management, maintenance or access control of our properties, including taxes, insurance and benefits relating to such employees, and travel and other out-of-pocket expenses that are directly related to the management of specific properties. Other charges, including fees and expenses of third-party professionals and consultants, ~~are~~will be reimbursed, subject to the limitations on fees and reimbursements contained in the ~~Charter.~~

Company's Articles of Amendment and Restatement (as amended and restated, the "Charter").

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

If ~~HIRM~~the Property Manager provides construction management services related to the improvement or finishing of tenant space in the Company’s real estate properties, the Company pays ~~HIRM~~the Property Manager a construction management fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project; provided, however, that the Company will only pay a construction management fee if a majority of the Company’s board of directors, including a majority of its independent directors, determines that such construction management fee is fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties.

The Company pays the Advisor a monthly asset management fee equal to one-twelfth of 0.75% of the higher of (i) the cost or (ii) the value of all real estate investments the Company acquires.

If Advisor or affiliate provides a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of one or more assets, the Company will pay the Advisor a disposition fee equal to (1) in the case of the sale of real property, the lesser of: (A) one-half of the aggregate brokerage commission paid (including the disposition fee) or, if none is paid, the amount that customarily would be paid, or (B) 3% of the sales price of each property sold, and (2) in the case of the sale of any asset other than real property, 3% of the sales price of such asset.

The Company will reimburse the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that, commencing four fiscal quarters after the Company’s acquisition of its first asset, the Company will not reimburse the Advisor for any amount by which its operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of: (1) 2% of the Company’s average invested assets (as defined in the Charter), or (2) 25% of the Company’s net income determined without reduction for any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of the Company’s assets for that period. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of this limitation if a majority of the Company’s independent directors determines that such excess expenses are justified based on unusual and non-recurring factors.

On November 1, 2019, the Company received an unsecured promissory note from Hartman Short Term Income Properties XX, Inc., an affiliate of the Advisor and the Property Manager, in the face amount of $10,000,000 with an interest rate of 10% annually. The outstanding balance of the note is $2,789,000 as of March 31, 2021 and December 31, 2020, respectively. The maturity date of the note is October 31, 2021.

Effective August 4, 2020, the Company transferred the balance due from Hartman Short Term Income Properties XX, Inc. in the amount of $8,200,000 together with additional advances in the amount of $2,412,000 for a total of $10,611,000, to a newly formed taxable REIT subsidiary, Hartman vREIT XXI TRS, Inc. The total amount is represented by two underlying notes from Hartman Retail III Holdings LLC and Hartman Ashford Bayou LLC. Each of the notes receivable bear interest at an annual interest rate of 10%. The maturity date of the notes is December 31, 2021.

VIEs are defined as entities with a level of invested equity that is not sufficient to fund future operations on a stand-alone basis, or whose equity holders lack certain characteristics of a controlling financial interest. For identified VIEs, an assessment must be made to determine which party to the VIE, if any, has both the power to direct the activities of the VIE that most significantly impacts the performance of the VIE and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company is not deemed to be the primary beneficiary of Hartman Retail III Holdings LLC or Hartman Ashford Bayou LL, each of which qualifies as a VIE. Accordingly, the assets and liabilities and revenues and expenses of Retail III Holdings and Ashford Bayou have not been included in the accompanying consolidated financial statements.

For the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the Company incurred property management fees and reimbursable costs of ~~$7,128~~$331,000 and $0$335,000, respectively, payable to the Property Manager and asset management

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

fees of ~~$13,219~~$138,000 and $0$144,000, respectively, payable to the Advisor. For the nine months ended September 30, 2017 and 2016, the Company incurred property management fees and reimbursable costs of $14,747 and $0 payable to the Property Manager and asset management fees of $37,013 and $0 payable to the Advisor. Property management fees and reimbursable costs paid to the Property Manager are included in property operating expenses in the accompanying consolidated statements of operations. Asset management fees paid to the Advisor are included in asset management fees in the accompanying consolidated statements of operations.

The Company pays construction management fees and leasing commissions to the Property Manager in connection with the construction management and leasing of the Company's properties. For the three months ended March 31, 2021 and 2020, the Company incurred construction management fees of $27,000 and $28,000, respectively, and $127,000 and $324,000, respectively, for leasing commissions. Construction management fees are capitalized and included in real estate assets in the consolidated balance sheets. Leasing commissions are capitalized and reported net of the amortized amount in the consolidated balance sheets.

As of ~~September 30, 2017,~~March 31, 2021, the Company had ~~$160,815~~$264,000 due ~~from~~to the Advisor, and ~~$274,830~~$1,360,000 due from Hartman Short Term Income Properties XX, Inc., and ~~$5,123~~$2,475,000 due ~~from~~to other Hartman affiliates. As of December 31, ~~2016,~~2020, the Company had ~~$19,107~~$126,000 due to the ~~Advisor.~~

~~Mr. Jack Cardwell, an independent director,~~Advisor, and ~~his affiliates, have invested $2,265,000 for~~$581,000 due from Hartman Short Term Income Properties XX, Inc., $1,323,000 due to the ~~purchase of 250,119 Class A common shares in the Company. As of September 30, 2017, Mr. Cardwell~~Property Manager and ~~his affiliates owned approximately 16% of the Company’s outstanding stock.~~

$448,000 due from other Hartman affiliates.

Note 89 — ~~Earnings (Loss)~~Loss Per Share

Basic ~~earnings (loss)~~loss per share is computed using net ~~income (loss)~~loss attributable to common stockholders and the weighted average number of common shares outstanding.

Three months ended September 30,
Nine months ended September 30,

2017
2016
2017
2016
Numerator:

Net income (loss) attributable to common stockholders
$       98,927
$                   -
$ (669,963)
$                   -
Denominator:

Weighted average common shares outstanding
976,949
22,100
854,265
22,100

Basic and diluted loss per common share:

Net income (loss) attributable to common stockholders
$           0.07
$                   -
$      (0.78)
$                   -


	Three months ended March 31,
	2021		2020
Numerator:
Net loss attributable to common stockholders (in thousands)	$	(1,066)	$	(438)
Denominator:
Basic weighted average shares outstanding (in thousands)	8,839		8,567
Basic loss per common share	$	(0.12)	$	(0.05)

Note 910 – Stockholders’ Equity

Under the ~~Company’s Articles of Amendment and Restatement (as amended and restated, the “Charter”),~~Charter, the Company has the authority to issue 900,000,000 shares of common stock, $0.01 per share par value, ~~classified and designated as 850,000,000 shares of Class A common stock, 50,000,000 shares of Class T common stock,~~ and 50,000,000 shares of preferred stock with a par value of $0.01 per share. On September 30, 2015, the Company sold 22,100 shares of common stock to Hartman Advisors, LLC at a purchase price of $9.05 per share for an aggregate purchase price of $200,005, which was paid in cash. The Company’s board of directors is authorized to amend the Charter, without the approval of the Company’s stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue.

On May 12, 2020, the board of directors authorized the classification and designation of Class I and Class S common stock. As of March 31, 2021, 900,000,000 shares of capital stock were classified as common stock, par value $0.01 per share, 270,000,000 of which were classified and designated as Class A common stock (“Class A Shares”), 280,000,000 were classified and designated as Class S common stock ("Class S Shares"), 280,000,000 of which were classified as Class I common stock ("Class I Shares"), and 70,000,000 were designated as Class T Common stock (“Class T Shares”). The additional share classes have been included in an amendment to the Company's registration statement and prospectus which was declared effective by the Securities and Exchange Commission on July 27, 2020.

Common Stock

Shares of ~~Class A and Class T~~all classes of common stock entitle the holders to ~~one~~1 vote per share on all matters which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

General Corporation Law. ~~Neither Class A~~No classified or ~~Class T~~designated class of common stock ~~have~~has any preferences or preemptive conversion or exchange rights.

On September 30, 2015, the Company sold 22,100 shares of common stock to Hartman Advisors, LLC at a purchase price of $9.05 per share for an aggregate purchase price of $200,005, which was paid in cash.

Preferred Stock

The board of directors, with the approval of a majority of the entire board of directors and without any action by the stockholders, may amend the ~~charter~~Charter from time to time to increase or decrease the aggregate number of authorized shares of capital stock or the number of authorized shares of capital stock of any class or series. If the Company were to create and issue preferred stock or convertible stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock or convertible stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities and the removal of incumbent management.

As of March 31, 2021, 50,000,000 shares were classified as preferred stock, par value $0.01 per share.

Stock-Based Compensation

The Company awards vested restricted common shares to non-employee directors as compensation in part for their service as members of the board of directors of the Company. ~~These shares are fully vested when granted. These shares may not be sold while an independent director is serving on the board of directors.~~ For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the Company granted ~~1,875~~710 and 0625 shares, respectively, of restricted common stock to independent directors as compensation for services. The Company recognized ~~$18,750~~$7,313 and ~~$0, respectively,~~$7,000 as stock-based compensation expense for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~

2020, respectively.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Distributions

The following table reflects the total distributions paid in cash and issued in shares of our common stock for the period from January 2017 (the month the Company ~~has~~first paid ~~including~~distributions) through March 31, 2021 (in thousands):


Period	Cash (1)		DRP & Stock (2)		Total
First Quarter 2017	$	27	$	19	$	46
Second Quarter 2017	62		72		134
Third Quarter 2017	105		115		220
Fourth Quarter 2017	127		163		290
First Quarter 2018	154		192		346
Second Quarter 2018	182		245		427
Third Quarter 2018	215		293		508
Fourth Quarter 2018	237		346		583
First Quarter 2019	305		388		693
Second Quarter 2019	388		484		872
Third Quarter 2019	498		646		1,144
Fourth Quarter 2019	746		629		1,375
First Quarter 2020	771		543		1,314
Second Quarter 2020	790		605		1,395
Third Quarter 2020	798		605		1,403
Fourth Quarter 2020	821		620		1,441
First Quarter 2021	566		566		1,132
Total	$	6,792	$	6,531	$	13,323

(1)Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately 20 days following the ~~total amount~~end of such month.

(2)Amount of distributions paid in shares of common stock pursuant to our distribution reinvestment plan and ~~amount paid per common share, in each indicated quarter:~~

stock dividend distribution.

Quarter Paid
Distribution per Common Share

Total Distributions Paid
2017

3^rd Quarter
$                  0.1875

$                208,604
2^nd Quarter
0.1875

123,666
1^st Quarter
0.1875

64,021
Total
$                  0.5625

$                396,291

2016

4^th Quarter
$                  0.1875

$                            -
3^rd Quarter
0.00

-
2^nd Quarter
0.00

-
1^st Quarter
0.00

-
Total
$                  0.1875

$                            -

Note 1011 — Incentive Plans

The Company has adopted a long-term incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, dividend equivalents, other stock-based awards and cash-based awards to directors, officers, employees and consultants of the Company and the Company’s ~~affiliates~~affiliates’ selected by the board of directors for participation in the Incentive Award Plan. Stock options and shares of restricted common stock granted under the Incentive Award Plan will not, in the aggregate, exceed an amount equal to 5.0% of the outstanding shares of the Company’s common stock on the date of grant or award of any such stock options or shares of restricted stock. Stock options may not have an exercise price that is less than the fair market value of a share of the Company’s common stock on the date of grant. Shares of common stock will be authorized and reserved for issuance under the Incentive Award Plan. The Company has adopted an independent directors’ compensation plan (the “Independent Directors Compensation Plan”) pursuant to which each of the Company’s independent directors will be entitled, subject to the plan’s conditions and restrictions, to receive an initial grant of 3,000 shares of restricted stock when the Company raises the minimum offering amount of $1,000,000 in the Offering. Each new independent director that subsequently joins the Company’s board of directors will receive a grant of 3,000 shares of restricted stock upon his or her election to the Company’s board of directors. The shares of restricted common stock granted to independent directors fully vest upon the completion of the annual term for which the director was elected. Subject to certain

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

conditions, the non-vested shares of restricted stock granted pursuant to the Independent Directors Compensation Plan will become fully vested on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company. ~~The Company recognized stock based compensation expenses of $18,750 and $0, respectively, with respect to~~Awards under the ~~independent director compensation~~Independent Directors Compensation Plan for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~

2020, respectively, consisted of 710 and 625 restricted, Class A common shares to our independent directors, valued at $10.23 and $11.70 per share based on the Offering price. The stock-based compensation expense is included in general and administrative expense in the accompanying consolidated statements of operations.

Note 1112 — Special Limited Partnership Interest

Pursuant to the limited partnership agreement for the OP, SLP LLC, the holder of the Special Limited Partnership Interest, will be entitled to receive distributions equal to 15.0% of the OP’s net sales proceeds from the disposition of assets, but only after the Company’s stockholders have received, in the aggregate, cumulative distributions equal to their total invested capital plus a 6.0% cumulative, non-compounded annual pre-tax return on such aggregated invested capital. In addition, the holder of the Special Limited Partnership Interest is entitled to receive a payment upon the redemption of the Special Limited Partnership Interests. Pursuant to the limited partnership agreement for the OP, the Special Limited Partnership Interests will be redeemed upon: (1) the listing of the Company’s common stock on a national securities exchange; (2) the occurrence of certain events that result in the termination or non-renewal of the Company’s advisory agreement with the Advisor (“Advisory Agreement”) other than by the Company for “cause” (as defined in the Advisory Agreement); or (3) the termination of the Advisory Agreement by the Company for cause. In the event of the listing of the Company’s shares of common stock or a termination of the Advisory Agreement other than by the Company for cause, the Special Limited Partnership Interests will be redeemed for an aggregate amount equal to the amount that the holder of the Special Limited Partnership Interests would have been entitled to receive, as described above, if the OP had disposed of all of its assets at their fair market value and all liabilities of the OP had been satisfied in full according to their terms as of the date of the event triggering the redemption. Payment of the redemption price to the holder of the Special Limited Partnership Interests will be paid, at the holder’s discretion, in the form of (i) limited partnership interests in the OP, (ii) shares of the Company’s common stock, or (iii) a non-interest bearing promissory note. If the event triggering the redemption is a listing of the Company’s shares on a national securities exchange only, the fair market value of the assets of the OP will be calculated taking into account the average share price of the Company’s shares for a specified period. If the event triggering the redemption is an underwritten public offering of the Company’s shares, the fair market value will take into account the valuation of the shares as determined by the initial public offering price in such offering. If the triggering event of the redemption is the termination or non-renewal of the Advisory Agreement other than by the Company for cause for any other reason, the fair market value of the assets of the OP will be calculated based on an appraisal or valuation of the Company’s assets. In the event of the termination or non-renewal of the Advisory Agreement by the Company for cause, all of the Special Limited Partnership Interests will be redeemed by the OP for the aggregate price of $1.

Note 1213 – Commitments and Contingencies

Economic Dependency

The Company is dependent on the Sponsor and the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of properties, management of the daily operations of the Company’s real estate portfolio, and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other providers.

Litigation

The Company is subject to various claims and legal actions that arise in the ordinary course of business. Management of the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position of the Company.

Contingencies

During February 2021, the state of Texas experienced a severe winter storm which resulted in power outages and electrical grid failures across the state. Wholesale prices for electricity increased significantly during this period. As a result, the Company experienced a substantial increase in electricity charges for a number of our properties during the month of and after the storm. The full impact of the winter storm on our electricity expense is still being assessed as we have not yet received all billings for the periods affected. For the three months ended March 31, 2021, the Company has incurred $921,000 of electricity expense compared to $252,000 for the three months ended March 31, 2020. On February 21, 2021 the Public Utility Commission of Texas issued an emergency order immediately suspending electricity disconnections for non-payment until further notice. It is currently unknown if any relief will be granted under future legislation enacted by the Texas state government or if the increase in electricity rates will be subject to litigation. It is possible these circumstances may occur.

Events related to the COVID-19 pandemic and the actions taken to contain it have created substantial uncertainty for all businesses, including the Company. The Company’s consolidated financial statements as of and for the three month period ended March 31, 2021 have been prepared in light of these circumstances. Management has determined that there has been 0 impairment on real estate assets. However, circumstances related to the COVID-19 pandemic may result in recording impairments in future periods.

Proposed merger with Hartman XX

On November 6, 2020, the board of directors of the Company and the board of directors of Hartman XX each approved a merger of Hartman XX with and into the Company. On January 26, 2021, the respective boards determined to delay the proposed merger transaction. A definitive effective date for the merger remains to be determined.

Note 14 – Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that no events have occurred, other than as disclosed herein above, that would require adjustments to our disclosures in these consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

As used herein, the terms “we,” “us” or “our” refer to Hartman vREIT XXI, Inc. and, as required by context, Hartman vREIT XXI Operating Partnership L.P., which we refer to as our “operating partnership,” and their respective subsidiaries.

Certain statements included in this quarterly report on Form 10-Q (this “Quarterly Report”) that are not historical facts (including statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions, or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events on our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. ��Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:



	●	~~our ability to raise capital in our ongoing initial public offering;~~

	●	~~our ability to effectively deploy the proceeds raised in our initial public offering;~~

	●	~~the imposition of federal taxes if we fail to qualify as a REIT in any taxable year or forego an opportunity to ensure REIT status;~~

	●	~~uncertainties related to the national economy, the real estate industry in general and in our specific markets;~~

	●	~~legislative or regulatory changes, including changes to laws governing REITS;~~

	●	~~construction costs that may exceed estimates or construction delays;~~

	●	~~increases in interest rates;~~

	●	~~availability of credit or significant disruption in the credit markets;~~

	●	~~litigation risks;~~

	●	~~risks inherent to the real estate business, including tenant defaults, potential liability related to environmental matters and the lack of liquidity of real estate investments;~~

	●	~~inability to obtain new tenants upon the expiration of existing leases at our properties;~~

	●	~~inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws;~~

	●	~~the potential need to fund tenant improvements or other capital expenditures out of operating cash flow;~~

	●	~~conflicts of interest arising out of our relationship with our advisor and its affiliates;~~
	●	~~our ability to generate sufficient cash flows to pay distributions to our stockholders;~~
	●	~~our ability to retain our executive officers and other key personnel of our advisor and other affiliates of our advisor; and~~
	●	~~changes to generally accepted accounting principles, or GAAP.~~

•our ability to raise capital in our ongoing initial public offering;

•the fact that we have a limited operating history and commenced operations on November 14, 2016;

•our ability to effectively deploy the proceeds raised in our initial public offering;

•the imposition of federal taxes if we fail to qualify as a REIT in any taxable year or forego an opportunity to ensure REIT status;

•uncertainties related to the national economy, the real estate industry in general and in our specific markets;

•legislative or regulatory changes, including changes to laws governing REITs;

•construction costs that may exceed estimates or construction delays;

•increases in interest rates;

•availability of credit or significant disruption in the credit markets;

•litigation risks;

•risks inherent to the real estate business, including tenant defaults, potential liability related to environmental matters and the lack of liquidity of real estate investments;

•inability to obtain new tenants upon the expiration of existing leases at our properties;

•inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws;

•the continuing adverse impact of the novel coronavirus (“COVID-19”) on the U.S.and Texas economies and our financial condition and results of operations;

•the potential need to fund tenant improvements or other capital expenditures out of operating cash flow;

•conflicts of interest arising out of our relationship with our advisor and its affiliates;

•our ability to generate sufficient cash flows to pay distributions to our stockholders;

•our ability to retain our executive officers and other key personnel of our advisor and other affiliates of our advisor; and

•changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon any forward-looking statements included herein. All forward-looking statements are made as of the date of this Quarterly Report, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason.

All forward-looking statements included in this Quarterly Report should be read in light of the factors identified in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020, filed with the SEC on March 31, ~~2017.~~

2021.

Overview

We were formed as a Maryland corporation on September 3, 2015 to acquire, develop and operate a diverse portfolio of value-oriented commercial properties, including office, retail, industrial and warehouse properties, located primarily in Texas. We intend to acquire properties in which there is a significant potential for growth in income and value from re-tenanting, repositioning, redevelopment, and operational enhancements. We believe that real estate, and in particular commercial real estate, provides an excellent investment for those investors looking for diversification, income and wealth preservation and growth in their portfolio. We believe that we have significant experience in acquiring and managing these types of properties, largely through our relationships with our sponsor and other affiliates.

~~On June 24, 2016, our registration statement on Form S-11, registering our initial public~~

Our follow-on offering ~~of up to $269,000,000 in shares of our common stock,~~(File no. 333-232308) was declared effective ~~by the SEC, and we commenced our initial public offering. On~~ January 9, 2017, we amended our charter to (i) designate our authorized shares of common stock as Class A shares of common stock and Class T shares of common stock and (ii) convert each share of our common stock outstanding as of date of the amendment to our charter into a share of our Class A common stock. On February 6, 2017, our amended registration statement on Form S-11, providing for our public offering of up to $269,000,000 in Class A shares of our common stock and Class T shares of our common stock, was declared effective by the SEC and we commenced offering Class A and Class T shares of our common stock.

14, 2020. In our ~~initial public~~follow-on offering, we are offering up to ~~$250,000,000~~$180,000,000 in any combination of Class A and Class T shares of our common stock to the public and up to ~~$19,000,000~~$5,000,000 in Class A and Class T shares of our common stock to our stockholders pursuant to our distribution reinvestment plan.

~~We are offering~~

Class A ~~shares of our~~ common stock was being offered to the public at an initial price of $10.00 per share and to ~~our~~ stockholders ~~pursuant to our distribution reinvestment plan~~ at an initial price of $9.50 per ~~share.~~

~~We are offering~~ share for Class A common stock purchased pursuant to the distribution reinvestment plan.

Class T ~~shares of our~~ common stock was being offered to the public at an initial price of $9.60 per share and to ~~our~~ stockholders ~~pursuant to our distribution reinvestment plan~~ at an initial price of $9.12 per share for Class T common stock purchased pursuant to the distribution reinvestment plan.

Beginning September 7, 2019, the sale price of the Company's Class A and Class T common shares to the public was $13.00 and $12.48 per share, representing the net asset value per share as determined by the board of directors plus the sales and managing broker dealer commissions and fees. The sale price of Class A and Class T

common shares to the Company's shareholders pursuant to the distribution reinvestment plan was $11.70 and $11.23 per share.

Effective May 18, 2020, the sale price of the Company's Class A and Class T common shares to the public is $11.44 and $10.95 per share, representing the net asset value per share as determined by the board of directors plus the applicable sales commissions and managing broker dealer fees. The sale price of Class A and Class T common shares to the Company's shareholders pursuant to the distribution reinvestment plan is $10.30 per share.

Effective January 26, 2021, the sale price of our Class A, Class S, Class I and Class T common shares to the public is $11.38, $10.61, $10.23 and $10.89 per share, respectively, representing the net asset value per share as determined by the board of directors plus the applicable sales commissions and managing broker dealer fees. The sale price of all classes of common shares to our shareholders pursuant to the distribution reinvestment plan is $10.23 per share.

Our board of directors may, in its sole discretion and from time to time, change the price at which we offer shares to the public in the primary offering or pursuant to our distribution reinvestment plan to reflect changes in our estimated value per share and other factors that our board of directors deems relevant. If we revise the price at which we offer our shares of common stock based upon changes in our estimated value per share, we do not anticipate that we will do so more frequently than quarterly. Our estimated value per share will be approved by our board of directors and calculated by our advisor based upon current available information which may include valuations of our assets obtained by independent third-party appraisers or qualified independent valuation experts.

As of ~~September 30, 2017,~~March 31, 2021, we had accepted subscriptions for, and issued ~~1,480,854~~8,390,166 shares, net of redemptions, of our Class A common stock, including ~~10,369~~629,769 shares issued pursuant to our distribution reinvestment plan and ~~65,348~~stock distributions, and 471,446 shares, net of redemptions, of our Class T common stock, ~~in our initial public offering,~~ including ~~310~~28,260 shares issued pursuant to our distribution reinvestment plan and stock distributions, resulting in gross proceeds of $15,004,383. As of September 30, 2017, $235,101,329 in shares of our Class A and Class T common stock remained to be sold in our initial public offering, excluding shares available under our distribution reinvestment plan.$87,462,193. We intend to use the net proceeds from our initial public offering to continue to acquire commercial real estate properties located primarily in Texas. We intend to offer shares of our common stock on a continuous basis until ~~June 24, 2018, provided that we may extend the offering period until June 24, 2019 (three~~January 14, 2023, three years from ~~the date of~~ the commencement of our ~~initial public offering) unless extended. However, in certain states the offering may continue for only one year unless we renew the offering period for an additional year.~~follow-on offering. We reserve the right to terminate our initial public offering at any time. D.H. Hill Securities, ~~LLLP~~LLP is the dealer manager for our initial public offering and is responsible for the distribution of our common stock in our initial public offering.

Hartman XXI Advisors, LLC, which we refer to as our advisor, manages our day-to-day operations and our portfolio of properties and real estate-related assets, subject to certain limitations and restrictions. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.

Substantially all of our business is conducted through Hartman vREIT XXI Operating Partnership, L.P., a Texas limited partnership, which we refer to as our operating partnership. We are the sole general partner of our operating partnership and Hartman vREIT XXI Holdings LLC, and Hartman vREIT XXI SLP, LLC, affiliates of our advisor, are the initial limited partners of our operating partnership. As we accept subscriptions for shares of our common stock, we will transfer substantially all of the net proceeds of the offering to our operating partnership as a capital contribution. The limited partnership agreement of our operating partnership provides that our operating partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our operating

partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended, which classification could result in our operating partnership being taxed as a corporation rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by our operating partnership in acquiring and operating our investments, our operating partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our operating partnership. We will experience a relative increase in liquidity as additional subscriptions for shares of our common stock are received and a relative decrease in liquidity as offering proceeds are used to acquire and operate our assets.

We ~~intend to qualify as a real estate investment trust, or REIT,~~elected under Section 856 (c) the Internal Revenue Code to be taxed as a REIT beginning with our taxable year ~~ending~~ended December 31, 2017. ~~If we qualify as~~As a REIT for federal income tax purposes, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year after the taxable year in which we initially elect to be taxed as a REIT, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is denied. Failing to qualify as a REIT could materially and adversely affect our net income.

Impact of the COVID-19 Pandemic

Since the first quarter of 2020, the COVID-19 pandemic which originated in mainland China has significantly impacted the global and U.S. economies. The Company’s properties are all located in Texas in the metropolitan areas of Houston, Dallas and San Antonio. The operation of tenant businesses is subject to the business judgement of tenant business owners and the direction of government authorities and public health officials. In accordance with the advice of the CDC due to the threat presented by the ongoing COVID-19 pandemic, some of the Company's office property tenants adopted remote working for their office employees, and we increased our janitorial cleaning protocols in our buildings. The Company's retail property tenants have been effected to the extent that they have required to close or limit hours of operations in the case of experiential businesses such as movie theaters, restaurants and specialty event operations. Restaurant and bar operations in the metropolitan areas in which our properties are located, have been required to limit activities to carry-out and delivery sales and service. The Company’s retail properties account for approximately 5% of the Company’s total base rental income. The rental obligations under our leases have not been materially affected by the pandemic to date, and any requests for rent adjustments are addressed on a case-by-case basis.

Although the impact of the COVID-19 pandemic on our business has not been severe to date, the long-term impact of the pandemic on our tenants or prospective tenants and the world-wide economy is uncertain and will depend on the scope, severity, and duration of the pandemic. A prolonged economic downturn resulting from the pandemic could adversely affect many of our tenants or prospective tenants, which could, in turn, adversely impact our business, financial condition, and results of operations.

Impact of Severe Winter Weather

Investment Objectives and Strategy: Hartman Advantage

Our primary investment objectives are to:

•realize growth in the value of our investments;

•preserve, protect and return stockholders’ capital contributions; and

•grow net cash from operations and pay regular cash distributions to our stockholders.

We cannot assure our stockholders that we will achieve these objectives.

The cornerstone of our investment strategy is our advisor’s discipline in acquiring a portfolio of real estate properties, specifically properties that are located in Texas, that offer a blend of current and potential income based on in place occupancy plus relatively significant potential for growth in income and value from ~~re-tenanting;~~re-tenanting, repositioning or redevelopment. We refer to this strategy as “value add” or the “Hartman Advantage.”

We rely upon the value add or Hartman Advantage strategy to evaluate numerous potential commercial real estate acquisition and investment opportunities per completed acquisition or investment.

We dointend continue to acquire, develop and operate a diverse portfolio of value-oriented commercial properties, including office, retail, industrial and warehouse properties located primarily in Texas. The commercial properties we acquire may be existing income-producing properties, properties developed by an affiliate of our advisor, newly constructed properties or properties under development or construction. We target properties that are located in high traffic areas, have adequate parking, have good curb appeal, have occupancy rates of at least 50%, and have a diversified tenant mix of creditworthy tenants.

We may also invest a portion of the offering proceeds available for investment in unimproved land upon which improvements are to be constructed or completed. However, we may not ~~anticipate that there will be any market for~~invest more than 10% of the aggregate cost of the real property assets within our ~~shares of common stock unless they are listed on a national securities exchange. In the event that our shares of common stock~~portfolio in unimproved land or real properties which are not ~~listed or traded on an established securities exchange prior~~expected to ~~the tenth anniversary~~produce income within two years of ~~the completion or termination~~their acquisition. Development of our initial public offering, our charter requires that the board of directors must seek the approval of our stockholders of a plan to liquidate our assets, unless the board of directors has obtained the approval of our stockholders (1) to defer the liquidation of our assets or (2) of an alternate strategy.

We believe that we have sufficient capital to meet our existing debt service and other operating obligations for the next year and that we have adequate resources to fund our cash needs. However, our operations arereal properties is subject to risks relating to a ~~variety of risks, including, but not limited~~builder’s ability to ~~changes~~control construction costs or to build in ~~national economic conditions, the restricted availability of financing, changes in demographic trends~~conformity with plans, specifications and interest rates and declining real estate valuations. As a result of these uncertainties, there can be no assurance that we will meet our investment objectives or that the risks described above will not have an adverse effect on our properties or results of operations.

timetables.

Our ~~Real Estate~~ Investments

As of ~~September 30, 2017,~~March 31, 2021, our investments in real estate assets consist of ~~(i)~~ten properties listed below and a ~~retail shopping center located in San Antonio, Texas commonly known as Village Pointe, which we refer to as the Village Pointe Property and (ii) a 37.6% ownership~~2.47% interest in a ~~joint venture~~special purpose entity which ~~owns a 19-story suburban~~includes membership of other Hartman affiliates, approximately 83% tenant in common interest in an office ~~building comprising approximately 366,549 square feet~~property located in ~~Dallas, Texas which we refer to as the Three Forest Property.~~

~~Village Pointe Property~~

As of September 30, 2017, the Village Pointe Property was 96% occupied by 12 tenants. Annual base rental income for the Village Pointe Property is $692,798. The average annual base rent per occupied square foot is $12.56Houston, and ~~the average annual effective rent per occupied square foot is $13.50.~~

~~Three Forest Property~~

~~On April 11, 2017, we entered into~~ a ~~membership interest purchase agreement with Hartman XX Limited Partnership, or Hartman XX LP, the operating partnership of Hartman Short Term Income Properties XX, Inc.,~~common stock investment in an affiliate. Pursuant to the terms of a membership interest purchase agreement we may acquire up to $10,000,000 of Hartman XX LP’s equity ownership interest in Hartman Three Forest Plaza, LLC, or Three Forest Plaza LLC, which owns the Three Forest Property.

As of September 30, 2017, we acquired an approximately 37.6% equity interest in Three Forest Plaza LLC from Hartman XX LP for an aggregate purchase price of $6,700,000. On October 19, 2017, we acquired an additional 11.2% equity interest in Three Forest Plaza LLC from Hartman XX LP for $2,000,000 bringing our total equity ownership interest in Three Forest Plaza LLC to approximately 48.8%.

As of September 30, 2017, the Three Forest Property was 79% occupied by 44 tenants, including three roof-top tenants. Annual base rental income for the Three Forest Property is $5,046,598. The average annual base rent per occupied square foot is $17.36 and the average annual effective rent per occupied square foot is $17.41.

Equity in earnings of the unconsolidated joint venture were $88,378 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $140,199 and $0 for the nine months ended September 30, 2017 and 2016, respectively.

affiliated REIT.


Property Name	Space Type	Location	Gross Leasable Area SF	Percent Occupied		Annualized Base Rental Revenue (in thousands)		Average Base Rental Revenue per Occupied SF		Average Net Effective Annual Base Rent per Occupied SF
Village Pointe	Retail	San Antonio	54,246	79	%	$	615	$	14.31	$	14.39
Richardson Tech Center	Flex/R&D	Dallas	96,660	61	%	$	519	8.74		8.58
Spectrum	Office	San Antonio	175,390	90	%	$	3,814	24.04		23.9
11211 Katy Freeway	Office	Houston	78,642	50	%	$	606	15.28		15.07
1400 Broadfield	Office	Houston	102,893	71	%	$	1,384	19.01		18.93
16420 Park Ten Place	Office	Houston	83,760	49	%	$	939	22.72		22.61
Willowbrook Building	Office	Houston	67,581	38	%	$	468	18.35		17.94
Timberway II	Office	Houston	130,828	72	%	$	2,016	21.54		21.53
One Park Ten	Office	Houston	34,089	54	%	$	318	17.40		17.2
Two Park Ten	Office	Houston	57,126	81	%	$	895	19.41		19.27
Grand Total			881,215	68	%	$	11,574	$	19.35	$	19.23

REIT Compliance

We ~~will be electing~~elected under Section 856(c) of the Internal Revenue Code to be taxed as a REIT beginning with the taxable year ~~ending~~ended December 31, 2017. As a REIT we generally are not subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year after the year in which we initially elected to be treated as a REIT, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income. However, we believe that we are organized and will operate in a manner that will enable us to qualify for treatment as a REIT for federal income tax purposes.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our results of operations and financial condition, as reflected in the accompanying consolidated financial statements and related notes, require us to make estimates and assumptions that are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions and other factors related to the ongoing viability of our customers. With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements. There have been no material changes to our critical accounting policies and estimates other than as set forth in the Annual Report for the year ended December 31, ~~2016.~~2020.See Note 2 to our consolidated financial statements in this Quarterly Report for a discussion of our currently adopted accounting policies.

RESULTS OF OPERATIONS

Comparison of the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 versus ~~September 30, 2016.~~

March 31, 2020.

As of ~~September 30, 2017,~~March 31, 2021 and 2020, we owned ~~the Village Pointe Property,~~10 properties comprising approximately 881,215 and square feet. As of March 31, 2021 and 2020, we owned a ~~commercial property located~~2.47% interest in an affiliate special purpose entity which owns 39 office, retail and light industrial properties in Houston, Dallas, and San Antonio, Texas, ~~and a 37.6% joint venture interest~~which refer to as the ~~Three Forest Property, in an office building located in Dallas, Texas. As of September 30, 2016, we owned no properties.~~

Hartman SPE interest.

Revenues – The primary source of our revenue is rental revenues and tenant reimbursements. For the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 we had total rental revenues and tenant reimbursements of ~~$247,984~~$3,296,000 and ~~$0, respectively. For the nine months ended September 30, 2017 and 2016 we had total rental revenues and tenant reimbursements of $667,113 and $0,~~$3,369,000, respectively. The ~~increase~~decrease is attributable to slight overall decrease in ~~total rental revenues and tenant reimbursements was primarily due to~~occupancy over the ~~fact that we did not own any properties as of September~~ comparative periods.

30 ~~2016, as compared to the one property we owned as of September 30, 2017.~~

Property Operating expenses – ~~Operating~~Property operating expenses consist of ~~property operating expenses (contract~~labor, contract services, repairs and maintenance, utilities and management ~~fees); real estate taxes and insurance; and asset management~~ fees. For the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, we had property operating expenses of ~~$92,776~~$1,821,000 and ~~$0 respectively. For the nine months ended September 30, 2017 and 2016 we had operating expenses of $265,003 and $0~~$1,334,000, respectively. The increase in property operating expenses is primarily due to the ~~fact that we did not own any properties~~increase in electricity expenses as a direct result of ~~September 30, 2016, as compared to~~ the ~~one property we owned as~~severe winter storm during February 2021. The storm resulted in significant increases in electric utility billings for the months of ~~September 30, 2017.~~

February and March 2021.

Fees to affiliates – We pay ~~acquisition fees and~~ asset management fees to our advisor in connection with the ~~acquisition of properties and~~ management of our company. Asset management fees to our advisor were ~~$13,219~~$138,000 and $0$144,000 for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. Asset management fees were $37,013 and $0 for the nine months ended September 30, 2017 and 2016, respectively. The increase in asset management fees is attributable to the one property we acquired on February 8, 2017. We pay property management and leasing commissions to our Property Manager in connection with the management and leasing of our properties. For the three months ended September 30, 2017 and 2016, we incurred $7,128 and $0, respectively, for property management fees and $21,903 and $0, respectively, for leasing commissions. For the nine months ended September 30, 2017 and 2016 we incurred $14,747 and $0, respectively, for property management fees and $21,903 and $0, respectively, for leasing commissions.

Real estate taxes and insurance – Real estate taxes and insurance were ~~$38,593~~$602,000 and $0$569,000 for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. ~~Real estate taxes and insurance were $108,457 and $0 for the nine months ended September 30, 2017 and 2016, respectively.~~ The increase is attributable to an increase in ~~cost is due to~~insurance premiums effective in the ~~one property we acquired on February 8, 2017 and the fact that we owned no properties during the three and nine months ended September 30, 2016.~~

second quarter of 2020.

Depreciation and amortization – Depreciation and amortization were ~~$46,271~~$1,391,000 and $0$1,462,000 for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. ~~Depreciation and~~The decrease is primarily related to decrease in amortization expense of our in-place lease value intangibles, which typically have a shorter useful life compared to other real estate asset components.

Equity in losses of equity method investment - Equity in losses of equity method investment were ~~$112,685~~$294,000 and $0 for the ~~nine~~three months ended ~~September 30, 2017~~ March 31, 2021 and ~~2016,~~2020, respectively. The increase ~~in cost~~ is due to the ~~one property we~~3100 Weslayan TIC interest acquired on ~~February 8, 2017 and the fact that we owned no properties during the three and nine months ended September~~December 30, ~~2016.~~

2020.

General and administrative expenses - General and administrative expenses were ~~$35,301~~$271,000 and $0$272,000 for the three months ended ~~September 30, 2017~~ March 31, 2021 and ~~2016, respectively. General and administrative expenses were $113,089 and $0 for the nine months ended September 30, 2017 and 2016,~~2020, respectively. General and administrative expenses consist primarily of audit fees, transfer agent fees, other professional fees, and independent ~~director~~director’s compensation. ~~The increase in cost is from owning one property during the nine months ended September 30, 2017~~

Interest expense - Interest expense was $284,000 and the fact that we owned no properties during the nine months ended September 30, 2016. We expect general and administrative expenses to increase only modestly in future periods as we acquire additional real estate and real estate related assets. We expect general and administrative expenses to decrease substantially as a percentage of total revenue.

~~Organizational and offering costs –~~ Effective December 31, 2016, the advisory agreement between us and our advisor was amended to provide that we will not reimburse our advisor for organization and offering costs incurred by our advisor on our behalf until we are in receipt of gross offering proceeds in our initial public offering of at least $10,000,000. During the three months ended June 30, 2017, total gross offering proceeds received in our initial public offering exceeded $10,000,000. As of September 30, 2017, total organization and offering costs incurred were $928,357 including $877,443 of organization and offering costs incurred by our advisor. Our advisor will not be reimbursed for organization and offering costs to the extent that such reimbursement would cause the total organizational and offering costs incurred by us (including selling commissions, dealer manager fees and all other underwriting compensation) to exceed 15% of the aggregate gross proceeds from the sale of the shares of common stock sold in our initial public offering. Any such reimbursement will not exceed the actual costs and expenses incurred by advisor. When recorded by us, organization costs are expensed as incurred, and offering costs, which include selling commissions, dealer manager fees and all other underwriting compensation, are deferred and charged to stockholders’ equity as such amounts are reimbursed or paid by the advisor, the dealer manager or their affiliates from the gross proceeds of our initial public offering.

For the three months ended September 30, 2017 and 2016, we incurred $23,462 and $0, respectively, of organization and offering costs. Total organization and offering costs recorded as expense were $872,440 and $0, including $824,514 previously advanced by our advisor, for the nine months ended September 30, 2017 and 2016, respectively.

~~Net income (loss) –~~~~We generated net income of $98,927 and $0~~$242,000 for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively~~2020, respectively. The increase is primarily due to overall increase in notes payable from March 31, 2020 to March 31, 2021.

Interest and dividend income - Interest and dividend income was $440,000 and 232,000 for the three months ended March 31, 2021 and 2020, respectively. The increase is primarily due to overall increase in notes receivable from March 31, 2020 to March 31, 2021.

Net loss –We generated a net loss of ~~($669,963)~~$1,066,000 and $0$438,000 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively~~2020. ~~Net loss for the nine months ended September 30, 2017~~The increase is primarily ~~attributable~~due to ~~offering and organization costs, including costs previously advanced by our advisor which we became liable for~~the increase in electricity expenses as a direct result of the severe winter storm in February 2021 mentioned in the ~~nine months ended September 30, 2017. We owned no properties during the nine months ended September 30, 2016.~~

property operating expenses section above.

Funds From Operations and Modified Funds From Operations

Funds From Operations, or FFO, is a non-GAAP financial measure defined by the National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, which we believe is an appropriate supplemental measure to reflect the operating performance of a real estate investment trust, or REIT in conjunction with net income. FFO is used by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment write-downs, plus depreciation and amortization, and after adjustments for

unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Additionally, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges.

Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization and impairments, provides a more complete understanding of the our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO and MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start up entities may also experience significant acquisition activity during their initial years, we believe that non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases. We intend to use the remaining net proceeds raised in our follow-on offering to continue to acquire properties, and intend to begin the process of achieving a liquidity event (~~i.e.~~, the listing of our common stock on a national exchange, a merger or sale or our company or another similar transaction) within ten years of the completion of our initial public offering. The Investment Program Association, or “IPA,” an industry trade group, has standardized a measure known as Modified Funds From Operations, or “MFFO,” which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (~~i.e.~~, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our public offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our public offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our public offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses. We do not currently exclude amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued acquisition fees and expenses negatively impact our operating performance during the period in which properties are acquired and will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. Accordingly, MFFO may not be an accurate indicator of our operating performance, especially during periods in which properties are being acquired. MFFO that excludes such costs and expenses would only be comparable to non-listed REITs that have completed their acquisition activities and have similar operating characteristics to us. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to investors. Acquisition fees and expenses will not be reimbursed by the advisor if there are no further proceeds from the sale of shares in our public offering, and therefore such fees and expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows.

Our management uses MFFO and the adjustments used to calculate it in order to evaluate our performance against other non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. For example, acquisitions costs are funded from the remaining net proceeds of our public offerings and other financing sources and not from operations. By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way, so comparisons with other REITs may not be meaningful. FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of its liquidity, or indicative of funds available to fund its cash needs including its ability to make distributions to its stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. FFO and MFFO are not useful measures in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO or MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT, or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and as a result we may have to adjust our calculation and characterization of FFO or MFFO.

The table below summarizes our calculation of FFO and MFFO for the three ~~and six~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 and a reconciliation of such non-GAAP financial performance measures to our net ~~loss.~~

loss, in thousands.

Three months ended September 30,
Nine months ended September 30,

2017
2016
2017
2016
Net income (loss)
$              98,927
$                     ––
$         (669,963)
$                     ––
Depreciation and amortization
46,271
––
112,685
––
Funds from operations (FFO)
145,198
––
(557,278)
––
Organization and offering costs
23,462
––
872,440
––
Modified funds from operations (MFFO)
$            168,660
$                     ––
$           315,162
$                     ––


	Three Months Ended March 31,
	2021		2020
Net loss	$	(1,067)	$	(438)
Depreciation and amortization of real estate assets	1,391		1,462
FFO attributable to unconsolidated entity, Hartman SPE, LLC (1)	(1)		136
Funds from operations (FFO)	323		1,160
Organization and offering costs	1		16
Modified funds from operations (MFFO)	$	324	$	1,176

(1) The Company's share of Hartman SPE, LLC FFO is based on the below financial data:


Hartman SPE, LLC	Three Months Ended March 31,
	2021			2020
Net income (loss)	$	(5,704)		$	(989)
Depreciation and amortization expense	5,662			6,491
FFO	$	(42)		$	5,502

Weighted average ownership	2.47		%	2.47		%

Distributions

The following table summarizes the distributions we ~~declared~~paid in cash and in shares of our common stock and the amount of distributions reinvested pursuant to the distribution reinvestment plan for the period from ~~December 2016~~January 2017 (the month we first ~~declared~~paid distributions) through ~~September 30, 2017:~~

March 31, 2021 (in thousands):

Period
Cash (1)
Stock (2)
Total
Period From inception to December 31, 2015
$                        -
$                        -
$                        -
First, second, third Quarters 2016
-
-
-
Fourth Quarter 2016
6,121
2,226
8,347
First Quarter 2017
35,853
34,514
70,367
Second Quarter 2017
71,216
87,168
158,384
Third Quarter 2017
105,245
130,776
236,021
Total
$            218,435
$            254,684
$            473,119


Period	Cash (1)		DRP & Stock (2)		Total
First Quarter 2017	$	27	$	19	$	46
Second Quarter 2017	$	62	$	72	$	134
Third Quarter 2017	$	105	$	115	$	220
Fourth Quarter 2017	$	127	$	163	$	290
First Quarter 2018	$	154	$	192	$	346
Second Quarter 2018	$	182	$	245	$	427
Third Quarter 2018	$	215	$	293	$	508
Fourth Quarter 2018	$	237	$	346	$	583
First Quarter 2019	$	305	$	388	$	693
Second Quarter 2019	$	388	$	484	$	872
Third Quarter 2019	$	498	$	646	$	1,144
Fourth Quarter 2019	$	746	$	629	$	1,375
First Quarter 2020	$	771	$	543	$	1,314
Second Quarter 2020	$	790	$	605	$	1,395
Third Quarter 2020	$	798	$	605	$	1,403
Fourth Quarter 2020	$	821	$	620	$	1,441
First Quarter 2021	$	566	$	566	$	1,132
Total	$	6,792	$	6,531	$	13,323

(1)

Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately 20 days following the end of such month.

(2)

Amount of distributions paid in shares of common stock pursuant to our distribution reinvestment plan and stock dividend distribution.

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, we ~~declared~~paid aggregate distributions of ~~$464,772~~$1,132,000, including ~~stock distributions and~~ distributions paid in shares of ~~common~~common stock pursuant to our distribution reinvestment ~~plan~~.plan. During the same period, cash ~~used in~~provided by operating activities was ~~$1,151,999,~~$386,000, our net loss was ~~$669,963~~$1,066,000 and our FFO was ($557,278). For the nine months ended September 30, 2017, 100% of cash distributions were paid from cash provided by offering proceeds. For the nine months ended September 30, 2016, we declared aggregate distributions of $0, including stock distributions and ~~distributions paid in shares of common stock pursuant to our distribution reinvestment plan. During the period from our inception to September 30, 2017, net cash used in operating activities was $1,144,032 our net loss was $718,200 and our FFO was ($605,515).~~$323,000. For a discussion of how we calculate FFO, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations.”

For the period from inception to March 31, 2021, we paid aggregate distributions of $13,323,000, including stock distributions and distributions paid in shares of common stock pursuant to or distribution reinvestment plan. During this period, cash provided by operating activities was $5,005,000, our net loss was $7,031,000 and our FFO was $8,545,000. For the period from inception to March 31, 2021 approximately 38% of our distributions were paid from cash flow from operating activities.

Liquidity and Capital Resources

As of ~~September 30, 2017,~~March 31, 2021, we had accepted investors’ subscriptions for, and issued, ~~1,480,854~~8,390,166 shares, net of redemptions, of our Class A common stock ~~including 10,369~~and 471,446 shares, ~~issued pursuant to our distribution reinvestment plan, and 65,348 shares~~net of redemptions of our Class T common stock in our initial and follow-on public ~~offering,~~offerings, including ~~310~~629,769 Class A shares and 28,260 Class T shares issued pursuant to our distribution reinvestment plan, ~~in our initial public offering,~~ resulting in aggregate gross offering proceeds of ~~$15,004,383.~~

$87,462,193.

Our principal demands for funds are and will continue to be for real estate and real estate-related acquisitions, for the payment of operating expenses, for the payment of interest on our outstanding indebtedness, and for the payment of distributions. Generally, we expect to meet cash needs for items other than acquisitions from our cash flow from operations; provided, that some or all of our distributions have been and may continue to be paid from sources other than cash from operations (as discussed below). We expect to meet cash needs for acquisitions from the remaining net proceeds of our follow-on offering and from financings.

Some or all of our distributions have been and may continue to be paid from sources other than cash flow from operations, including proceeds of our public offerings, cash advances to us by our advisor, cash resulting from a waiver of asset management fees and borrowings secured by our assets in anticipation of future operating cash flow. We may have little, if any, cash flow from operations available for distribution until we make substantial investments and those investments stabilize. In addition, to the extent our investments are in development or redevelopment projects or in properties that have significant capital requirements, our ability to make distributions may be negatively impacted, especially during our early periods of operation.

We use, and intend to use in the future, secured and unsecured debt to acquire properties and make other investments. As of ~~September 30, 2017,~~March 31, 2021, our outstanding secured debt is ~~$3,525,000.~~$36,445,000. There is no limitation on the amount we may invest in any single property or other asset or on the amount we can borrow for the purchase of any individual property or other investment. Under our charter, we are prohibited from borrowing in excess of 300% of our “net assets” (as defined by our charter) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors and if such excess is disclosed to the stockholders in the next quarterly report along with the explanation for such excess borrowings. Our board of directors has adopted a policy to limit our aggregate borrowings to approximately 50% of the aggregate value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests. Such limitation, however, does not apply to individual real estate assets and only will apply once we have ceased raising capital in our public offering and invested substantially all of our capital. As a result, we expect to borrow more than 50% of the contract purchase price of each real estate asset we acquire to the extent our board of directors determines that borrowing these amounts is prudent.

Our advisor may, but is not required to, establish capital reserves from remaining gross offering proceeds, out of cash flow generated by operating properties and other investments or out of non-liquidating net sale proceeds from the sale of our properties and other investments. Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions and major capital expenditures. Alternatively, a lender may require its own formula for escrow of capital reserves.

Potential future sources of capital include proceeds from additional private or public offerings of our securities, secured or unsecured financings from banks or other lenders, proceeds from the sale of properties and undistributed funds from operations. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.

Cash Flows from Operating Activities

As of ~~September 30, 2017~~March 31, 2021 and 2020, respectively, we had ~~continuing~~ operations from ~~one~~ten commercial real estate ~~property~~properties and ~~an investment~~investments in an unconsolidated real estate ~~joint venture.~~entities. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, net cash ~~used in~~provided by operating activities was ~~$1,151,999~~$386,000 versus $0$(1,184,000) net cash used in operating activities for the ~~nine~~three months ended ~~September 30, 2016. We expect~~March 31, 2020. The increase in cash ~~flows to be~~ provided by operating activities was primarily due to an increase of $988,000 in ~~future periods as a result~~due to/from related parties, increase of ~~additional acquisitions of real estate~~$909,000 in accounts payable and ~~real estate related investments.~~

accrued expenses and $197,000 increase in deferred lease commissions.

Cash Flows from Investing Activities

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, net cash used in investing activities was ~~$8,941,903~~$639,000 versus $0$4,479,000 for the ~~nine~~three months ended ~~September 30, 2016 and consisted of $27,423 of additions to real estate, $6,700,000 investment~~March 31, 2020. The decrease in ~~an unconsolidated real estate joint venture and $2,214,480~~net cash used in investing activities for the ~~investment~~three months ended March 31, 2021 was primarily due to decrease in ~~Village Pointe.~~

notes receivable advances to related parties of $3,800,000 during the three months ended March 31, 2020.

Cash Flows from Financing Activities

~~Cash flows from financing activities consisted primarily of proceeds from our ongoing public offering and distributions paid to our common stockholders.~~

Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2017 and 2016, respectively,~~March 31, 2021 was ~~$12,148,522 and $0 and consisted of the following:~~

~~$13,544,165 of cash provided by offering proceeds related to our public offering, net of payments of commissions on sales of common stock and related dealer manager fees of $1,202,355;~~

~~$770 of~~$307,000 versus $5,840,000 net cash provided by financing activities for the ~~change~~three months ended March 31, 2020. Cash flows from financing activities decreased mainly due to a decrease of $818,000 in ~~escrowed investor proceeds; and~~

~~$194,058~~proceeds from issuance of ~~cash distributions.~~

common stock, offset by an decrease in proceeds from revolving credit facility of $5,100,000 for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Contractual Commitments and Contingencies

We use, and intend to use in the future, secured and unsecured debt, as a means of providing additional funds for the acquisition of our properties and our real estate-related assets. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. Under our charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets. We may borrow in excess of this amount if such excess is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of ~~September 30, 2017,~~March 31, 2021, our borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor. We expect to make payments to our advisor or its affiliates in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our assets, the management of the development or improvement of our assets and costs incurred by our advisor in providing services to us.

As of ~~September 30, 2017,~~March 31, 2021, we had ~~a note~~notes payable totaling an aggregate principal amount of ~~$3,525,000.~~$36,445,000. For more information on our outstanding indebtedness, see Note ~~6 (Note~~7 (Notes Payable, net) to the consolidated financial statements included in this report.

~~The following is~~

On November 6, 2020, our board of directors of the Company and the board of directors of Hartman XX each approved a ~~summary~~merger of ~~our contractual obligations as of September 30, 2017:~~

Contractual Obligations
Total
2017
2018-2019
2020-2021
Thereafter
Long-term debt obligations (1)
$ 3,525,000
$                 -
$    3,525,000
$               -
$               -
Interest payments on outstanding debt obligations(2)
320,578
35,533
285,045
-
-
Purchase obligations(3)
-
-
-
-
-
Total
$ 3,845,578
$       35,533
$    3,810,045
$               -
$               -

~~(1)~~

~~Amounts include principal payments only.~~

~~(2)~~

~~Projected interest payments are based on~~Hartman XX with and into the ~~outstanding principal amount and projected rate of 3.98% on~~Company. On January 26, 2021, the ~~floating monthly Libor rate.~~

~~(3)~~

~~Purchase obligations were excluded from contractual obligations as there were no binding purchase obligations as of September 30, 2017.~~

respective boards determined to delay the proposed merger transaction. A definitive effective date for the merger remains to be determined.

Off-Balance Sheet Arrangements

As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Pronouncements

Based on preliminary assessments, we do not expect the adoption of any recently issued but not yet effective or early-adopted accounting standards to have a material effect on our consolidated financial position or our consolidated results of operations. See Note 2 to the consolidated financial statements included in this Quarterly Report.

Related-Party Transactions and Agreements

We have entered into agreements with our ~~advisor~~Advisor and its affiliates whereby we have paid, and may continue to pay, certain fees to, or reimburse certain expenses of, our ~~advisor~~Advisor and its affiliates. See Item 13, “Certain Relationships and Related Transactions and Director Independence” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 and Note 78 (Related Party Arrangements) to the consolidated financial statements included in this Quarterly Report for a discussion of the various related-party transactions, agreements and fees.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We will be exposed to interest rate changes primarily as a result of long-term debt used to acquire properties and make loans and other permitted investments. Our interest rate risk management objectives will be to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we expect to borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates. With regard to variable rate financing, we will assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Form 10-Q, as of ~~September 30, 2017,~~March 31, 2021, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). In performing this evaluation, management reviewed the selection, application and monitoring of our historical accounting policies. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of ~~September 30, 2017,~~March 31, 2021, these disclosure controls and procedures were effective and designed to ensure that the information required to be disclosed in our reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported as and when required.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended ~~September 30, 2017~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financing reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

~~N/A~~

The outbreak of the novel coronavirus, COVID-19, has caused and may continue to cause moderate to severe disruptions in the United States as well as Texas state and local economies and could have a material adverse effect on our business, financial condition and results of operations.

The COVID-19 pandemic has caused significant disruptions to the United States economy as well as the economies of the State of Texas and major Texas communities and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually evolving and, as additional cases of the virus are identified, many countries, including the United States, have reacted by instituting quarantines, restrictions on travel and mandatory closures of businesses. Cities in Texas where we own properties and/or have development sites, have substantially "re-opened for business" as the result of the lifting of government restrictions from the state to local levels. Safety protocols at the local level continue to be followed by business establishments including our tenants such as social distancing, capacity limitations and mask requirements. The degree to which businesses have returned to pre-pandemic operations is highly variable..

Future impact of the COVID-19 pandemic on our operations and financial condition will however depend on future developments, which are uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, on-going actions taken to contain or mitigate the impact and effects of the pandemic, and the direct and indirect economic effects of the pandemic and containment measures. Nevertheless, the COVID-19 pandemic may adversely affect our business, financial condition and results of operations, and may have the effect of heightening many of the risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020, including:

•failure of our tenants to perform tenant obligations under our leases including but not limited to timely payment of rent and other charges;

•the disruptive impact on tenant personnel resources, which could hinder our ability to renew expiring leases, initiate or complete tenant build-out and construction projects and otherwise interfere with our tenant relationships;

•disruptions in the supply of materials or products or the inability of contractors to perform on timely basis tenant improvement construction or other construction and development;

•a general decline in business activity and demand for real estate transactions, which could adversely affect our ability or desire to continue growing our portfolio of properties;

•the likelihood that the impact of COVID-19 could result in an event or change in circumstances that results in an impairment charge in the value of one or more of our properties, which would result in an immediately negative adjustment to our earnings and could have a material adverse effect on our business, financial conditions and results of operations in the period in which the charge takes place;

•uncertainty as to whether business interruption, loss of rental income and/or other associated expenses related to our operations across our portfolio will be covered by our insurance policies, which may increase unreimbursed liabilities; and

•the potential negative impact on the health of our personnel, including our senior management team, particularly if a significant number of our employees or key members of our senior management are impacted, which could result in a deterioration in our ability to ensure business continuity during a disruption.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended, or the Securities Act.

~~During~~

The table below sets forth information regarding the ~~three months ended September 30, 2017, we did not make any purchases~~shares of our ~~equity securities,~~common stock redeemed pursuant to our share redemption program during the three months ended March 31, 2021.


	Total Number of Shares Requested to be Redeemed (1)	Total Number of Shares Redeemed	Average Price Paid per Share (2)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program (3)
January 2021	4,635	4,635	$	10.23
February 2021	—	—	$	—
March 2021	—	—	$	—
Total	4,635	4,635	$	10.23

(1) We generally redeem shares in the month following the end of the fiscal quarter in which requests were received.

(2) Pursuant to the share redemption program, we currently redeem shares at NAV most recently determined. Notwithstanding the foregoing, the redemption price for redemptions sought upon a stockholder’s death or ~~otherwise.~~

disability or upon confinement to a long-term care facility, is available only for stockholders who purchased their shares directly from us or the persons specifically set forth in the share redemption program.

(3) The number of shares that may be redeemed pursuant to our share redemption program will not exceed (i) 5% of the weighted-average number of shares outstanding during the 12-month period immediately prior to the effective date of the redemption and (ii) those share redemptions that can be funded with proceeds from our distribution reinvestment plan plus, if we had positive net operating cash flow for the previous fiscal year, 1% of all operating cash flow from the previous fiscal year.

On June 24, 2016, our Registration Statement on Form S-11 (File No. 333-207711), registering our initial public offering of up to $269,000,000 in shares of our common stock, was declared effective by the SEC under the Securities Act and we commenced our initial public offering. On January 9, 2017, we amended ~~our articles of amendment and restatement, or~~ our charter, to (i) designate our authorized shares of common stock as Class A shares of common stock and Class T shares of common stock and (ii) convert each share of our common stock outstanding as of date of the amendment to our charter into a share of our Class A common stock. On February 6, 2017, our amended registration statement on Form S-11 (File No. 333-207711), registering our public offering of up to $269,000,000 in shares of our Class A common stock and Class T common stock, was declared effective by the SEC and we commenced offering shares of our Class A and Class T common stock in our initial public offering.

In our initial public offering we are offering up to $250,000,000 in any combination of shares of our Class A and Class T common stock to the public and up to $19,000,000 in shares of our Class A and Class T common stock to our stockholders pursuant to our distribution reinvestment plan.

Our follow-on offering (File no. 333-232308) was declared effective January 14, 2020. In our follow-on offering, we are offering up to $180,000,000 in any combination of Class A and Class T shares of our common stock to the public and up to $5,000,000 in Class A and Class T shares of our common stock to our stockholders pursuant to our distribution reinvestment plan.

Effective September 7, 2019, the sale price of our Class A and Class T common shares to the public was $13.00 and $12.48 per share, representing the net asset value per share as determined by the board of directors plus the

applicable sales commissions and managing broker dealer fees. The sale price of Class A and Class T common shares to our shareholders pursuant to the distribution reinvestment plan was $11.70 and $11.23 per share.

Effective May 18, 2020, the sale price of our Class A and Class T common shares to the public is $11.44 and $10.95 per share, representing the net asset value per share as determined by the board of directors plus the applicable sales commissions and managing broker dealer fees. The sale price of Class A and Class T common shares to our shareholders pursuant to the distribution reinvestment plan is $10.30 per share.

On May 12, 2020, our board of directors authorized the classification and designation of Class I and Class S common stock. As of March 31, 2021, 900,000,000 shares of capital stock were classified as common stock, par value $0.01 per share, 270,000,000 of which were classified and designated as Class A common stock (“Class A Shares”), 280,000,000 were classified and designated as Class S common stock ("Class S Shares"), 280,000,000 of which were classified as Class I common stock ("Class I Shares"), and 70,000,000 were designated as Class T Common stock (“Class T Shares”). The additional share classes have been included in an amendment to the Company's registration statement and prospectus which was declared effective by the Securities and Exchange Commission on July 27, 2020.

From our inception through ~~September 30, 2017,~~March 31, 2021, we ~~had~~have recognized selling commissions, dealer manager fees and organization and other offering costs in our initial public offering in the amounts set forth below. The dealer manager for our public offering reallowed all of the selling commissions and a portion of the dealer manager fees to participating broker-dealers.



Type of Expense	Amount (in thousands)		Estimated/Actual
Selling commissions and dealer manager fees		$ ~~1,213,299~~	6,385	Actual
Finders’ fees		—		—
Expenses paid to or for underwriters		—		—
Other organization and offering costs		~~928,357~~ 1,774		Actual
Total expenses		$ ~~2,141,656~~	8,159

As of ~~September 30, 2017,~~March 31, 2021, the net offering proceeds to us from our initial public offering after deducting the total expenses incurred as described above, were ~~$12,862,727.~~$73,857,000. For the period from inception through ~~September 30, 2017,~~March 31, 2021, the ratio of the cost of raising capital to capital raised was approximately ~~14%~~11.05%.

We intend to use substantially all of the available net proceeds from our initial public offering to continue to invest in a portfolio of real properties. As of ~~September 30, 2017,~~March 31, 2021, we ~~had~~ used ~~$3,775,000~~$44,868,000 of the net proceeds from our initial public offering, plus debt financing, to purchase ~~one property and we had~~ten properties. We used ~~$6,700,000~~$8,027,000 of net offering proceeds to invest in an unconsolidated real estate joint venture between our company and Hartman XX Limited Partnership, the operating partnership of our affiliate, Hartman ~~Short Term Income Properties~~XX. We used $3,707,000 of net offering proceeds to invest in Hartman XX ~~Inc.~~

common shares and Hartman XX Operating Partnership OP units. We used $13,400,000 of net offering proceeds to invest in our taxable REIT subsidiary and affiliate notes receivable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit		Description
~~Exhibit~~ 3.1.1		~~Description~~ Articles Supplementary to the Third Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on August 12, 2020.
~~3.1~~ 3.1.2		Third Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 3 to the Post-Effective Amendment No. 1 to the Company’s Registration statement on Form S-11 (Registration No. 333-207711) filed on January 12, 2017.)
3.2		Bylaws ~~(incorporated~~(incorporated by reference to Exhibit 3.2 to Pre-Effective Amendment No. 5 to the Company’s Registration statement on Form S-11 (Registration No. 333-207711) filed on May ~~20,~~23, 2016.)
~~4.1~~ 31.1*		~~Form of Subscription Agreement (incorporated by reference to Appendix B the prospectus of the Company dated April 26, 2017)~~
~~4.2~~	~~Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Appendix B the prospectus of the Company dated April 26, 2017)~~
~~31.1~~	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ~~(FILED HEREWITH)~~
~~31.2~~ 31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ~~(FILED HEREWITH)~~
~~32.1~~ 32.1*		Certification of Chief Executive Officer ~~pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)~~
~~32.2~~	~~Certification of~~and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ~~(FILED HEREWITH)~~
~~101.INS~~ 101.INS*		XBRL Instance Document
~~101.SCH~~ 101.SCH*		XBRL Taxonomy Extension Schema Document
~~101.CAL~~ 101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
~~101.DEF~~ 101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
~~101.LAB~~ 101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
~~101.PRE~~ 101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HARTMAN vREIT XXI, INC.

Date:

~~November 14, 2017~~

May 13, 2021

By: /s/ Allen R. Hartman

Allen R. Hartman,

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

Date:

~~November 14, 2017~~

May 13, 2021

By: /s/Louis T. Fox, III

Louis T. Fox, III,

Chief Financial Officer,

(Principal Financial and Principal Accounting Officer)


HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	September 30, 2017	December 31, 2016
ASSETS	(Unaudited)

Real estate assets, at cost	$ 7,257,174	$ -
Accumulated depreciation and amortization	(112,685)	-
Real estate assets, net	7,144,489	-

Cash and cash equivalents	2,152,430	97,810
Investment in unconsolidated joint venture	6,831,800	1,376,439
Escrowed investor proceeds	282,050	320,775
Lease Commissions, net	20,730	-
Accrued rent and accounts receivable, net	27,904	-
Prepaid expenses and other assets	50,285	-
Due from related parties	440,768	-
Total assets	$ 16,950,456	$ 1,795,024

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:
Note payable, net	$ 3,474,707	$ -
Accounts payable and accrued expenses	329,511	57,240
Due to related parties	-	19,107
Subscriptions for common stock	282,045	320,000
Tenants' security deposits	52,208	-
Total liabilities	4,138,471	�� 396,347

Commitments and contingencies

Special Limited Partnership Interests	1,000	1,000

Stockholders' equity:
Common stock, Class A, $0.01 par value, 850,000,000 shares authorized, 1,505,454 and 160,775 shares issued and outstanding at September 30, 2017 and December 31, 2016 respectively	15,055	1,608
Common stock, Class T, $0.01 par value, 50,000,000 shares authorized, 65,348 shares and 0 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	653	-
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding at June 30, 2017 and March 31, 2017, respectively	-	-
Additional paid-in capital	13,986,596	1,452,653
Accumulated distributions and net loss	(1,191,319)	(56,584)
Total stockholders' equity	12,810,985	1,397,677

Total liabilities and equity	$ 16,950,456	$ 1,795,024

The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)

	Class A and Class T Common Stock
	Shares	Amount	Additional Paid-In Capital	Accumulated Distributions And Net Loss	Total
Balance at December 31, 2016	160,775	$ 1,608	$ 1,452,653	$ (56,584)	$ 1,397,677
Issuance of common shares	1,410,027	14,100	13,736,298	-	13,750,398
Selling commissions	-	-	(1,202,355)	-	(1,202,355)
Dividends and distributions (stock based)	-	-	-	(252,458)	(252,458)
Dividends and distributions (cash based)	-	-	-	(212,314)	(212,314)
Net loss (including net income attributable to non-controlling interest of $5,400)	-	-	-	(669,963)	(669,963)
Balance at September 30, 2017	1,570,802	$ 15,708	$ 13,986,596	$ (1,191,319)	$ 12,810,985
*The accompanying notes are an integral part of these consolidated financial statements.*


Tenant Name	Annualized Rental Revenue	Percentage of Total Annualized Rental Revenue	Initial Lease Date	Lease Expiration Year
Mattress Firm	$ 119,915	17.3%	10/2013	2018
SA Bike World	109,918	15.9%	11/2016	2026
Top Brass, Inc.	96,034	13.9%	11/2015	2021
ABDEP, LP	81,072	11.7%	1/2015	2020
Total	$ 406,939	58.8%


	Three months ended September 30,		Nine months ended September 30,
	2017	2016	2017	2016
Numerator:
Net income (loss) attributable to common stockholders	$ 98,927	$ -	$ (669,963)	$ -
Denominator:
Weighted average common shares outstanding	976,949	22,100	854,265	22,100

Basic and diluted loss per common share:
Net income (loss) attributable to common stockholders	$ 0.07	$ -	$ (0.78)	$ -


Quarter Paid	Distribution per Common Share	Total Distributions Paid
2017
3^rd Quarter	$ 0.1875	$ 208,604
2^nd Quarter	0.1875	123,666
1^st Quarter	0.1875	64,021
Total	$ 0.5625	$ 396,291

2016
4^th Quarter	$ 0.1875	$ -
3^rd Quarter	0.00	-
2^nd Quarter	0.00	-
1^st Quarter	0.00	-
Total	$ 0.1875	$ -


Period	Cash (1)	Stock (2)	Total
Period From inception to December 31, 2015	$ -	$ -	$ -
First, second, third Quarters 2016	-	-	-
Fourth Quarter 2016	6,121	2,226	8,347
First Quarter 2017	35,853	34,514	70,367
Second Quarter 2017	71,216	87,168	158,384
Third Quarter 2017	105,245	130,776	236,021
Total	$ 218,435	$ 254,684	$ 473,119


Contractual Obligations	Total	2017	2018-2019	2020-2021	Thereafter
Long-term debt obligations (1)	$ 3,525,000	$ -	$ 3,525,000	$ -	$ -
Interest payments on outstanding debt obligations(2)	320,578	35,533	285,045	-	-
Purchase obligations(3)	-	-	-	-	-
Total	$ 3,845,578	$ 35,533	$ 3,810,045	$ -	$ -